question
Do you think the price elasticity of demand for Ford sport - utility vehicles (SUVs) will increase, decrease, or remain the same when other car manufacturers, such as General Motors, decide to make and sell SUVs.
answer
The price elasticity of demand for Ford SUVs will decrease because other cars are viewed as less of a substitute.
question
Do you think the price elasticity of demand for Ford sport - utility vehicles (SUVs) will increase, decrease, or remain the same when SUVs produced in foreign countries are banned from the American market.
answer
The price elasticity of demand for Ford SUVs will increase because other cars are viewed as more of a substitute.
question
Do you think the price elasticity of demand for Ford sport - utility vehicles (SUVs) will increase, decrease, or remain the same when due to ad campaigns, Americans believe that SUVs are much safer than ordinary passenger cars.
answer
The price elasticity of demand for Ford SUVs will increase because other cars are viewed as more of a substitute.
question
Do you think the price elasticity of demand for Ford sport - utility vehicles (SUVs) will increase, decrease, or remain the same when The time period over which you measure the elasticity lengthens. During that longer time, new models such as four - wheel - drive cargo vans appear.
answer
Nothing
question
The city government is losing millions of on the mass transit system (buses and subways). The government proposes to increase the fare of a ticket by 20% to raise revenue and has asked your advice. You know that the price elasticity of demand for mass transit in the city is approximately equal to 1.5. What do you think of the proposal to increase the fare to raise revenue for the city? Be as specific as possible.
answer
Because the elasticity of demand is 1.5, a 20% increase in the price of mass transit will decrease ridership by only 25%. Because the percentage increase in the price is less than the percentage decrease in quantity demanded, total revenue from sales of mass transit tickets will increase.
question
An increase in demand this summer for luxury cruises leads to a huge jump in the sales price of a cabin on the Queen Mary 2.
answer
perfectly elastic
question
The price of a kilowatt of electricity is the same during periods of high electricity demand as during periods of low electricity demand.
answer
perfectly inelastic
question
Fewer people want to fly during February than during any other month. The airlines cancel about 10% of their flights as ticket prices fall about 20% during this month.
answer
elastic
question
Owners of vacation homes in Maine rent them out during the summer. Due to the soft economy this year, a 30% decline in the price of a vacation rental leads more than half of homeowners to occupy their vacation homes themselves during the summer.
answer
inelastic
question
The Disney Company regularly offers coupons good for discounted admissions into its amusement parks. However, they never offer any discounts on merchandise inside the parks (food; souvenirs; etc.). How can you explain this difference using the concept of price elasticity of demand? Be thorough in your answer.
answer
Disney has no 'real' competition when it comes to Disney World or Disneyland, but it likes to be nice to help its image and lower prices for tickets. It knows that once you get inside the park, you will get hungry, thirsty and want a souvenir, so you will be willing to pay anything for those items instead of leaving the park for decent priced food and drink. Basically, Disney makes up for the discounted ticket by gouging on prices inside the park.
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