In this assignment, you are to prepare a report analyzingthe two problems below. Be sure to include your own interpretation and opinionas you prepare this report.
You are the manager of a firm that receives revenues of$40,000 per year from product X and $90,000 per year from product Y. The ownprice elasticity of demand for product X is 1.5, and the cross-priceelasticity of demand between product Y and X is 1.8
Going beyond a simple definition, explain what is meant byown price elasticity of demand.
Going beyond a simple definition, explain what is meant bycross-price elasticity of demand.
Explain why it is important for a business manager or ownerto understand the two forms of elasticity.
How much will your firm’s total revenues (revenues from bothproducts) change if you increase the price of good X by 2 percent? Show yourmath.
Mr. Abel owns a small chain of gasoline stations in a largeMidwestern town. He read an article that said the own price elasticity ofdemand for gasoline in the United States is 0.2. Because of this highlyinelastic demand in the United States, Mr. Abel is thinking about raisingprices to increase revenues and profits. He has asked for your opinion.
Discuss the implications of own price elasticity.
Discuss the relationship between price changes, revenue, andown price elasticity of demand.
Interpret the -0.2 own price elasticity of demand.
Do you recommend that Mr. Abel raise prices?
Prepare a 3-4 page report in APA style that summarizes yourfindings. If you use outside resources, cite appropriately. Submit your reportusing the instructions below.
| Criteria | Ratings | Pts | ||
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Content
Problem 1
Correct explanation of own price elasticity of demand. Adequately discusses own price elasticity. |
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Mechanics
Responses are written at the graduate level with proper punctuation, grammar, and mechanics
Follows APA Style Minimum of three pages in length. |
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Total Points: 100
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