1) Assume that the average price of a 2021 model of Suzuki Dzire car in Addis Ababa is Birr 1,890,000 and 90,000 cars are sold out by an importer sold at this price in a year. a) If the price elasticity of demand for new cars is 1.7 what will be the effect on annual sales when the price of this new model declines to Birr 1,600,000. (1.5 points) b) Formulate the demand function for Suzuki Dzire car based on the information summarized in (a) above.(1.5 points) 2) A sole importer of Samsung refrigerator in Ethiopia, is planning to reduce the price of its refrigerators by 10%. It is also expected that customers' disposable income will increase by 6% during the same period. The price and income elasticity are estimated to be 1.2 and 2.0, respectively. Currently Samsung is selling 200,000 pieces of refrigerators per year. How much can the importer of Samsung refrigerator hope to sell after the above changes in price and income occur? ( 2 points) 3) Suppose XYZ Dairy Firm at Sululta is selling flavored milk and Yogurt in packets of 150ml. The dairy sells 2000 packets of flavored milk and 1000 packets of Yogurt every day. The former is priced at Birr 6 and the latter at Birr 4. A market survey estimates the cross-price elasticity (both ways) to be +1.8, and the own price elasticity of flavored milk to be 1.2. The dairy is contemplating a 10% reduction in the price of flavored milk. Should it go ahead with the price reduction or not? Show your workings. ( 3 points) 4) Consider a software firm that is trying to determine the optimal price for one of its popular software programs. Management estimates this product's demand curve to be: Q=1,60004P where Q is copies sold per week and P is price in dollars. a) Drive the total revenue (TR) and Marginal revenue (MR) functions( 2 points) b) Find the quantity demanded and price that make price elasticity of demand unitary elastic. Calculate the value of TR and MR at that level of quantity demanded. (2 points) c) Suppose the software firm is operating originally at the quantity demanded and price that make price elasticity of demand unitary elastic. What happen to elasticity, value of TR, and MR along the above linear demand curve, i) when moving up to a higher price, say 300 Birr; ii) when moving to lower price, say to 100 Birr; iii) Show the Elasticity and TR relationship as well as the liner demand and MR graphically for the case of (i)and (ii) above. (3 points) 5) Suppose you are a manager in charge of monitoring cash flow at a company that makes photography equipment. Traditional photography equipment comprises 80 percent of your revenues, which grow about 2 percent annually. You recently received a preliminary report that suggests consumers take three times more digital photographs than photos with traditional film, and that the cross-price elasticity of demand between digital and disposable cameras is 0.2 (negative). In 2021, your company earned about 400 million Birr from sales of digital cameras and about 600 million Birr from sales of disposable cameras. Thus, if the own price elasticity of demand for disposable cameras is -2.5 (negative) this year, how will a 1 percent decrease in the price of disposable cameras affect your overall revenues of the company from both disposable and digital camera sales? ( 3 points) 1) Assume that the average price of a 2021 model of Suzuki Dzire car in Addis Ababa is Birr 1,890,000 and 90,000 cars are sold out by an importer sold at this price in a year. a) If the price elasticity of demand for new cars is 1.7 what will be the effect on annual sales when the price of this new model declines to Birr 1,600,000. (1.5 points) b) Formulate the demand function for Suzuki Dzire car based on the information summarized in (a) above.(1.5 points) 2) A sole importer of Samsung refrigerator in Ethiopia, is planning to reduce the price of its refrigerators by 10%. It is also expected that customers' disposable income will increase by 6% during the same period. The price and income elasticity are estimated to be 1.2 and 2.0, respectively. Currently Samsung is selling 200,000 pieces of refrigerators per year. How much can the importer of Samsung refrigerator hope to sell after the above changes in price and income occur? ( 2 points) 3) Suppose XYZ Dairy Firm at Sululta is selling flavored milk and Yogurt in packets of 150ml. The dairy sells 2000 packets of flavored milk and 1000 packets of Yogurt every day. The former is priced at Birr 6 and the latter at Birr 4. A market survey estimates the cross-price elasticity (both ways) to be +1.8, and the own price elasticity of flavored milk to be 1.2. The dairy is contemplating a 10% reduction in the price of flavored milk. Should it go ahead with the price reduction or not? Show your workings. ( 3 points) 4) Consider a software firm that is trying to determine the optimal price for one of its popular software programs. Management estimates this product's demand curve to be: Q=1,60004P where Q is copies sold per week and P is price in dollars. a) Drive the total revenue (TR) and Marginal revenue (MR) functions( 2 points) b) Find the quantity demanded and price that make price elasticity of demand unitary elastic. Calculate the value of TR and MR at that level of quantity demanded. (2 points) c) Suppose the software firm is operating originally at the quantity demanded and price that make price elasticity of demand unitary elastic. What happen to elasticity, value of TR, and MR along the above linear demand curve, i) when moving up to a higher price, say 300 Birr; ii) when moving to lower price, say to 100 Birr; iii) Show the Elasticity and TR relationship as well as the liner demand and MR graphically for the case of (i)and (ii) above. (3 points) 5) Suppose you are a manager in charge of monitoring cash flow at a company that makes photography equipment. Traditional photography equipment comprises 80 percent of your revenues, which grow about 2 percent annually. You recently received a preliminary report that suggests consumers take three times more digital photographs than photos with traditional film, and that the cross-price elasticity of demand between digital and disposable cameras is 0.2 (negative). In 2021, your company earned about 400 million Birr from sales of digital cameras and about 600 million Birr from sales of disposable cameras. Thus, if the own price elasticity of demand for disposable cameras is -2.5 (negative) this year, how will a 1 percent decrease in the price of disposable cameras affect your overall revenues of the company from both disposable and digital camera sales? ( 3 points)