I need assistance with the following question:
A researcher estimated that the price elasticity of demand for automobiles in the United States is -1.2, while the income elasticity of demand is 3.0. Next year, U.S. auto makers intend to increase the average price of automobiles by 5 percent, and they expect consumers' disposable income to rise by 3 percent.
(a) If sales of domestically produced automobiles are 8 milion this year, how many autombiles do you expect US automakers to sell next year?
(b) By how much should domestic auto makers increase the price of automobiles if they wish to increase sales by 5 percent next year?
I think you should repost this question with the subject saying:
DrBob222 PLease help me with Managerial Economics
or something
because I wish I could help you but I can't
also asl?
The price elasticity is (%change in Q)/(%change in P). So, use algebra.
(X/5) = -1.2 Solve for X (which is the percentage change in Q.
Income elasticity is (%change in Q)/(%change in income). Repeat the above steps.
(To keep things simple, I would assume the price increase and income increase occur simultaneously, and therefore move off the same base. Otherwise, you need to assume a stacking order (e.g., price first then income).
Now simply add the percentage changes to get the net change.
I am using the textbook Managerial Economics 8th ed. by Christopher Thomas & Charles Maurice. I am having a problem understanding the concept and how to solve a problem in chapter 3 of the text. It is talking about how to figure marginal benefit and marginal cost. On page 111 of the text it has a graph that is asking you to figure out at 60 units of activity, what is the marginal benefit and marginal cost. Dr. Bob222, please help ,me with Managerial Economics. Thanks
To calculate the marginal benefit and marginal cost at 60 units of activity, you would need additional information or context from the graph on page 111. The graph is likely to provide a relationship between the quantity of activity and the corresponding marginal benefit and marginal cost.
If the graph is not provided, you may need to look for a different example or problem in your textbook that provides the necessary information to calculate marginal benefit and marginal cost at a specific quantity.
To understand the concept of marginal benefit and marginal cost, let's break it down:
1. Marginal Benefit: This refers to the additional benefit or utility gained from consuming or producing one more unit of a good or service. It represents the increase in satisfaction or value obtained. Marginal benefit can be influenced by factors such as preferences, tastes, and the law of diminishing marginal utility, which states that the additional satisfaction from each additional unit tends to decrease.
2. Marginal Cost: This refers to the additional cost incurred from producing or consuming one more unit of a good or service. It represents the increase in the total cost. Marginal cost can be influenced by factors such as resource scarcity, production technology, and economies of scale.
To solve problems related to marginal benefit and marginal cost, you need to analyze the relationship between the quantity of activity and its corresponding benefit and cost. This analysis can be done graphically or by using mathematical equations, depending on the specific problem.
If you have a specific question or example from your textbook that you would like assistance with, please provide the relevant information, and I would be happy to help you further.