Question

Each scenario below gives some information about price elasticity of demand for a firm. Use this information to answer the following questions. Round answers to two places after the decimal where applicable. Honest Abe's Used Cars estimates the price elasticity of demand for their cars to be 1.60. Last month, Abe tried a new marketing scheme which decreased the number of cars sold by 87%. Abe must have prices. Abe's prices must have changed by Therefore, Abe's total revenue At Webs-R-Us, a website design company, the new manager has decided to increase the price of Webs-R-Us services by 35 %. If Webs-R-Us has a price elasticity of demand at 0.50, we can expected the number of websites designed to Therefore, Webs-R-Us's total revenue will The number of websites will change by

Answer 1

Answer * Given collect from the data * let us assume that the equations are * it is honest honest abe's used abe's used cars demand the estimate elasticity of cars e 1. Their car to be 1.60 * They are tried new marketing scheme in to decreased the number of cars sold by 87% → púce elasticity of demand = %. change in quantity demanded/ % change in price & Honest abet w it is able to increased prices (iiNow you change in price = %. change in quantity demanded/ Elasticity = -875-1.60 = 0.543 Güüj) it is total = 54-377 revenue decreases values of electivity is higher than I demand is elastic. (3) Webs-Ries 0 % change in quantity demanded = Elasticity X % change in price = (-0.50) x 35% = -0.145 =-17.53. it is expect number of website decveses by 19.5% 12.5%. (decrese by 13.5 The number of website will change by - 17.57. → it is total revenue of increasy + THE END - >