Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Business Economics Expert

Calculation of elasticity of demand.

N May 1970 the trustees of the Village of  Potsdam, New York, decided to double the rate charged residents for water, in abundance supply from the local river, I order to pay for their new sewage treatment plant. Two colleges in the village constitute about half the population when they are in session and pat the same water rate as do households.
The Village Administrator's prediction of revenues and the actual results are as follows:

Fiscal year
Price per 1000 gallons
Predicted estimated revenue
Gallons sold (Thousands)
Actual revenue
June 1969- May 1970
$0.60
$180,000
290,540
$174,325
June 1970- May 1971
1.20
360,000
278,045
336,654

a. Illustrate what elasticity of demand did the Village Administrator seem to suppose here in his prediction for 1970- 1971?

b.Compute the approximate elasticity of demand (round off, two decimal places is close enough).

c.Consider the policy advantages of raising the price of water to pay for the sewage plant rather than raising real estate taxes.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M919512

Have any Question? 


Related Questions in Business Economics

Suppose that a company offers quantity discounts if up to a

Suppose that a company offers quantity discounts. If up to a 1000 units are purchased, the unit price is $10; if more than a thousand and up to 5000 units are purchased, the unit price is $9; and if more than 5000 units ...

When analyzing a projects present value it is acceptable to

When analyzing a project's Present Value, it is acceptable to use "Net Income" in your calculations because annual "Net Income" is the same thing as annual "Net Cash Flow" for your company.

Ambassador automobiles aa is not sure of their order of 100

Ambassador Automobiles (AA) is not sure of their order of 100 units to Diversitek (D). Based on the market research, there is only a 35% chance that AA purchases the order of 100 units of SS from D and a 65% chance that ...

Why does the government grant patents to companies that

Why does the government grant patents to companies that research new drugs?

Mr jones intends to retire in 20 years at the age of 65 as

Mr. Jones intends to retire in 20 years at the age of 65. As yet he has not provided for retirement income, and he wants to set up a periodic savings plan to do this. If he makes equal annual payments into a savings acco ...

Why are the rules governing plagiarism important for

Why are the rules governing plagiarism important for academic communities? Are there situations where the rules are too stringent? What is the most difficult aspect of understanding these rules? Explain briefly in 300 wo ...

Discuss the impact of major accountingfinancial scandals on

Discuss the impact of major accounting/financial scandals on investors’ asset preferences. In your opinion how do the scandals affect foreign markets? Discuss two macro variables that affect changes in interest rates/or ...

John has a factory that produces paper and as a side

John has a factory that produces paper and as a side product some chemicals are thrown into the water: one unit of the pollutant per unit of paper. The marginal benefit to John of producing paper is given by MB = 10 – Q. ...

A new firm is developing its business plan it will require

A new firm is developing its business plan. It will require $635,000 of assets, and it projects $450,000 of sales and $355,000 of operating costs for the first year. Management is reasonably sure of these numbers because ...

Which of the following explains why big business typically

Which of the following explains why big business typically spends more on rent-seeking activities than consumers? A. Lobbying is a public good to consumers. B. Lobbying is a public good to businesses. C. Labor unions in ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate