the market of prescription medicine is not very competitive. A company holding patent for a medicine has market power. The demand of prescription medicines is relatively inelastic. So‚ the percentage fall in demand of prescription medicine is less than the percentage rise in price. As demand of these medicines is relatively inelastic‚ pharmaceutical companies may set very high price. In such cases‚ government intervention is required to bring down the price of prescription medicines. For example‚ in
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computer. Japan now has a comparative advantage in the production of computers (rel. low opp cost) and so they will export computers. Russia will export cars. 2. The demand for hot chocolate is as follows. The Supply is perfectly inelastic at quantity of 40. (16 marks) Price $0 $1 $2 $3 $4 $5 Quantity Demanded 100 80 60 40 20 0 Quantity Supplied 40 40 40 40 40 40 (a) Draw the DD0 and SS0 curves in a fully labeled diagram
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A price increase under inelastic demand will lead to an increase in total revenue. A. the demand is inelastic‚ and a price rise will reduce the total revenue B. the demand is inelastic‚ and a price rise will increase the total revenue C. the demand is elastic‚ and a price rise will reduce the total revenue D. the demand is elastic‚ and a price rise will increase the total revenue By definition‚ the demand is inelastic. Also‚ when demand is inelastic‚ the price should be increased
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$0.50‚ the quantity demanded is 400 packs per day. When the price falls to $0.40‚ the quantity demanded increases to 600. Given this information and using the midpoint method‚ we know that the demand for bubble gum is a. inelastic. b. elastic. c. unit elastic. d. perfectly inelastic. 2. Using the midpoint method‚ the price elasticity of demand for a good is computed to be approximately 0.78. Which of the following events is consistent with a 4.68 percent decrease in the quantity of the good demanded
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change in price for the good or product. 3. Determine if the demand for the following products is price elastic or price inelastic‚ and explain your answer. In your explanation‚ be sure to include how the necessity of a good and the availability of substitutes affect the price elasticity of demand in each of these specific cases: • Gasoline as a commodity This is inelastic because gasoline cannot be substituted with anything. • Gasoline sold at a local gasoline station Elastic because there
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Microeconomics I Homework#1 Answer Key Fall 2009 I. Multiple choice question 1 2 3 4 5 6 7 8 9 10 D C C A A D D B A C 11 12 13 14 15 C C A B C 1) Who or what is responsible for the allocation of scarce resources into the production of most goods in the U.S.? A) the American government B) the UN C) the Federal Reserve Bank D) markets and prices Answer: B 2) Which of the following is an example of a normative statement?
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A. Discuss elasticity of demand as it pertains to elastic‚ unit‚ and inelastic demand. Elasticity of demand is gauged by the percentage of change in demand when the price of an item varies. If the change in the quantity demanded is greater than 1 the demand is elastic. Elasticity of demand is calculated by ED=quantity demanded/decrease in price. If you reduce the price of milk by 6%‚ and that causes an increase of quantity demanded by 9% the demand for milk is elastic (ED= .09/.06 = 1.5).
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Knowledge Check Week 6 The material presented below is not meant to be a comprehensive list of all you need to know in the content area. Rather it is a starting point for building your knowledge and skills. Additional study materials are recommended in each area below to help you master the material. Personalized Study Guide Results: Score: 5 / 6 Concepts | Mastery | Questions | Elasticity | 67% | * 1 * 2 * 3 | Relationship of Pricing Strategy to Market Structure | 100% | * 4
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The article ¡§Pain at checkout as WA bananas go east¡¨ by Regina Titelius and Jennifer Eliot states that in the wake of cyclone Larry¡¦s unforgiving wrath on Queensland‚ banana prices have soared throughout the nation over the last month and are expected to rise even more following WA¡¦s wholesaler Mercer Mooney declared that Carnarvon bananas would be shipped east. Following cyclone Larry¡¦s destruction on Queensland‚ it has wiped out about 80 per cent of Australia¡¦s bananas destroying fruit worth
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Introduction to Economics: In class exercise - part 2 - Chapter 4 Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The cross elasticity of demand is calculated as the percentage change in the 1) _______ A) price of one good divided by the percentage change in the price of another good. B) quantity demanded of one good divided by the percentage change in the price of
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