Worksheet 5: Elasticity ECON 102: Principles of Microeconomics DUE: Wednesday, Mar. 6th 2024 - Submit answers on Canvas by 11:59pm Student Name: Today, October 10, Hulu raised its subscription prices. Announced in August, the Disney-owned streaming service, as well as ESPN+ and Disney+, are all getting price hikes. Hulu is increasing its ad-supported plan from $6.99 to $7.99 per month. Its ad-free plan now costs $14.99 per month instead of $12.99 per month. Remember: Total Revenue = Price * Quantity Sold (1) Traditional Method Percent Change Formula: %Change = New - Old - * 100 (2) Old Midpoint-Method Percent Change Formula: New - Old %Change = (New + Old) /2 * 100 (3) . Based on the information above: 1. At the initial price of $13 per Hulu membership, how much revenue would the total sales of 2,000,000 memberships create for Hulu each month?: Revenue = $.e IF you recommend the option to raise the price to $15 and sell 1,500,000 mem- berships: 2. At the new price of $15 per membership per month, how much revenue would the total sales of 1,500,000 memberships create for Hulu, per month?: Revenue = $____________ *Using the Traditional Method for Calculating Percentage Change* 3. Calculate the Percentage Change in Price: AP= % 4. Calculate the Percentage Change in Quantity Demanded (be careful with the sign): A= % 5. Calculate the Own-Price Elasticity of Demand. (DO NOT wuse the Mid-Point Method) (DO NOT take the absolute value): (be very careful with the sign) ef = 6. Based on your answer above, Demand for Hulu memberships would be considered: ) Perfectly Inelastic ) Inelastic (c) Unit Elastic (d) Elastic ) Perfectly Elastic o *Assuming the same Price Elasticity of Demand calculated above:**** 7. If you instead recommended that Hulu lower the price from $13 to $10 per month, how many memberships would you expect to sell per month? Q4= ____________ 8. At the new price of $10 per membership, how much revenue would the total monthly sales of Hulu memberships create for Hulu?: Revenue =$____________ 8. At the new price of $10 per membership, how much revenue would the total monthly sales of Hulu memberships create for Hulu?: Revenue=9%______ e Based on all of the information above: 9. If Hulu raises the Price of Hulu memberships (from $13 to $15), total revenues collected will (increase/decrease). 10. If Hulu lowers the Price of Hulu memberships (from $13 to $10), total revenues collected will (increase/decrease). 11. Therefore, in order to meet Hulu's goal of maximizing revenues, from the following options you should recommend that Hulu: __________ (a) Decrease the price to $10 (b) Maintain the price at $13 (c) Increase the price to $15 Let's take this a step further, and assume that Hulu actually cares about maxi- mizing Profits, and not specifically Revenues. e Assume that Hulu faces a constant Marginal Cost of $10.50 per Hulu membership it produces. 12. 13. 14. 15. Calculate the Monthly Net Profit that Hulu will earn if Hulu memberships are sold at a price of $10 each. : Profit=9%____________ Calculate the Monthly Net Profit that Hulu will earn if Hulu memberships are sold at a price of $13 each. : Profit=%___________ Calculate the Monthly Net Profit that Hulu will earn if Hulu memberships are sold at a price of $15 each. : Profit=9$___ Therefore, in order to meet Hulu's goal of maximizing PROFIT, from the following options you should recommend that Hulu: __________ (a) Set the price at $10 (b) Set the price at $13 (c) Set the price at $15