Use the following information to answer questions 1 through 4:
When the local grocery store lowers the price of cashews from $7.50 per pound to $6.00 per pound, the quantity sold increases from 800 pounds per month to 1000 pounds per month.
1. Using the midpoint method, calculate the percentage change in quantity demanded for the cashews described above
2. Using the midpoint method, calculate the percentage change in price for the cashews described above.
3. Finally, using the whole formula, calculate the value of the price elasticity of demand for cashews.
4. What does this result mean? (What type of good is cashews? Is the price elasticity of demand elastic? Inelastic?)
Use the following information to answer questions 5 through 8:
When the local grocery store raises the price of toothpaste from $2.00 per tube to $2.50 per tube, the quantity sold decreases from 10 tubes per month to 9 tubes per month.
5. Using the midpoint method, calculate the percentage change in quantity demanded for the toothpaste described above
6. Using the midpoint method, calculate the percentage change in price for the toothpaste described above.
7. Finally, using the whole formula, calculate the value of the price elasticity of demand for cashews.
8. What does this result mean? (What type of good is toothpaste? Is the price elasticity of demand elastic? Inelastic?)
Use the following information to answer questions 9 and 10:
Consider the following demand schedule for shoes.
|
Price |
Quantity Demanded |
|
$10 |
600 |
|
$20 |
500 |
|
$30 |
400 |
|
$40 |
300 |
|
$50 |
200 |
|
$60 |
100 |
|
$70 |
0 |
9. If the store currently charges a price of $50 for a popular brand of running shoes, then increases the price to $60, what happens to total revenue from shoe sales?
10.If the store currently charges a price of $50 for a popular brand of running shoes, then decreases the price to $40, what happens to total revenue from shoe sales?
ECWhat should the shoe store charge?
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