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Applications of the price elasticity of demand
1) Why do you think that whenever the government wants to increase their revenue they usually decide to increase the tax on items such as gas, tobacco products and/or alcohol?
2) Why is it unlikely that a firm would sell at a price where its demand curve happens to be price inelastic?
3) Assume the demand for cosmetic or plastic surgery is price inelastic. Are the following statements true or false? Explain.
a. when the price of plastic surgery increases, the number of operations decreases.b. the percentage change in the price of plastic surgery is less than the percentage change in quantity demanded.c. changes in the price of plastic surgery do not effect the number of operationsd. quantity demanded is quite responsive to changes in pricee. if more plastic surgery is performed, expenditures on plastic surgery will decrease.f. the marginal revenue of another operation is negative.
Suppose instead that the government wishes to impose a value tax of $0.25 on each dollar of the consumer's expenditure on good 1.Show the effect of imposing this tax in a graph containing before and after budget lines.
Is the price elasticity of demand elastic or inelastic for that good or service. Explain how should the company alter the price of the good or service to increase revenues.
Most of the critics argue that America has too many elections, a surplus of elected officials, and unwieldy layers of government.
Between your answers to parts b and c, which prices/capacity are best applied from a social welfare perspective? Why?
What is the difference between the medium of exchange and the store of value? What is the difference between commodity money and fiat money?
Use the IS/LM model and the IS-PC-MR model to explain what monetary policy to pursue.
To increase marketplace share, Giuseppe would like to raise sales to 750 every week. Elucidate price should Giuseppe set.
Observe the characteristics which influenced the buying behavior of each person interviewed. Based on the people interviewed
The Hull Petroleum Company and Inverted V are retail gasoline franchises that compete in a local market to sell gasoline to consumers.
Write down his budget constraint and a utility function that captures his preferences. Draw his budget constraint and three of his indifference curves.
Suppose that because of the ongoing financial turmoil banks become more prudent: that is, other things equal, banks want to hold more excess reserves and make fewer loans.
Calculate the price elasticity of demand for the product below using average values for the prices and quantities in your formula.
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