Question

Name Due. Please show work in detail. All questions utilize the multivariate demand function for Smooth Sailing sailboats in C6 on text page 83, initially with: Ps= $9500 Py = $10000 I= $15000 A=$170000 W=160 This function is: Os=89830-40P, +20P, +15P, +21+.001A +10W 1. Use the above to calculate the art price elasticity of demand between Ps - $8000 and Ps - $7000. The are elasticity 2. Calculate the quantity demanded at each of the above prices and revenue that will result if the quantity is sold (fil in table below) Marketing suggests lowering the price from $8000 to $7000. The size of the clasticity cofficient in N should tell you what is likely to happen to revenue. Explain why this is (or is not a good marketing suggestion from a revenue viewpoint (note: your answer in and the calculations in N2 should be giving the same message). If the implications in 1 and 2 differ, does the difference make sense or did you make a mistake in 1 or 027 4. Assume that Ps - $7500 (which should make Qs - 161600). Now, using the point elasticity formula below, calculate the point price elasticity of demand. Is this point elasticity coefficient the same as the are coefficient in VI? Why does this make sense if the two are the same? If the two differ, does this make sense and why? The fomalais: ap, 5. Calculate the point cross-price elasticity of demand between Qs and Px with Px $9500. Use Os corresponding to Ps 9000. Other variables and their values are as given at the top, before question . Does this clasticity indicate that the demand for Smooth Sailing's boats is relatively responsive to changes in Px? Explain why or why not. The formula is: Capo ExxPx Calculate the point cross-price elasticity of demand between and given that 10000 and that - $7500 thus should equal 161,600). Other variables are as given at the top before . Does this clasticity indicate that the demand for Smooth Sailing boat is relatively responsive to changes in Explain why why not. The for Egyre Flasticity 11.doc September 16, 2016

Answer 1

DELTA/Pugo No 0 0 0 89830 - 40 pe + 20 Px tispy + 25 +0-001 A flow, 09930-yols 420(9 500) + 15110000) 29615000) + 0-001 17000) Ilo (160) 461600. – 40PS) [Os Os =461600-408000) =M600 when Ps=8000 when Ps= 7000 Os=461 600-4 (70) 181600 40000 2500 Are Elasticity = Qawa 1000 161600 10855435 As Elesticity P Revenue 141600 8000 2000 11323OOOOO 127120OOOO 181600 sene demand is elastic which mekis an also inverse relation blwanic o revened which is seen import z. Yes, point abesticity at the mid point of the dange is equa so the are elasticity ROUGH