Question
During the current COVID-19 pandemic, we read a lot about firms charging excessive prices for (2) essential items such as face masks and hand sanitizer.
During the current COVID-19 pandemic, we read a lot about firms charging excessive prices for (2) essential items such as face masks and hand sanitizer. Make use of the concept of elasticity to justify why (i) consumers were willing to pay the high price and (ii) from a firms' perspective, it was rational behaviour to increase the price.
If the price of Good A decrease by 6%, the Qd of Good A increases by 3%, while the Qd of Good B decrease by 18%. Calculate and classify both the price-elasticity and cross-elasticity coefficient.
2.3 Assume that a 25% decrease in income results in a 10% increase in the quantity demanded of Good X in April. 2.3.1 Calculate and classify the income-elasticity coefficient of Good X for April.
2.3.2 Suppose that the firm expects consumer income to fall by 5% in May. Make use of your income elasticity coefficient, to calculate both the percentage- and unit change in the quantity demanded of Good X for May, assuming that consumers bought 8000 units of Good X in April.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started