Question

1)---For the following scenarios, first solve for price elasticity of demand, then determine if the good is elastic or inelastic. a) If the price of sweaters increases by 10 % , the quantity demand decreases by 13.5 %. b) The original price of yoga pants was $25.00, and 1,000 pairs were sold. The price then increased to $30.00, and the number of pairs sold decreased to 800. Use the midpoint formu la to solve. 2)-Disney World recently instituted strategic prices, charging park attendees different prices based on the time of year. This has caused overall attendance at the park to decrease, but overall revenue to increase. How does the concept of elasticity explain why Disney implemented strategic pricing, and what the results were? 3)-If you are a new business owner, why would you need to know the various elasticities for the good you are selling? Describe what benefits this information provides to the owner.

Answer 1

Answer to question 1.

1.a Price elanticity ot demand tor Swentens %o change in 9antity dlemanded o/0 Change price 13.5 35 The valve of eloticity is gneafen than 1 means demand is price efantic mid poimt method of PED 42-61 P-P P2 +P G2=me uanit S,=1mitial quantity dlemanded = 1000 2 demande d 800 P2 =new price = $ 30; P, = imitial tnice = $25 PED= 800-1000 30 25 Ce) 800 +1000 30+25 2 2L 200 x 2 5 X2 18 0 a 55 400 55 1 22 10 1800 abso lute vafoe of :laoticity is .. As tne gmcafen means demand tor yoga pants is puice than 1: 5.e. 1: 2 2 1, it elantic