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1. A rise in the price of a certain commodity from $15 to $20 reduces quantity demanded from 20,000 to 5,000 units. Calculate the own-price elasticity of demand and state whether the demand for this product is elastic or inelastic. If each nit costs $10 to produce, was this a wise move for the company's profit position? Why?

2. If the price elasticity of demand for gasoline is 0.3, and the current price is $1.20 per gallon, what rise in the price of gasoline (in cents or dollars) will reduce its consumption by 10%? please explain.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9292574

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