3-8. Sailright Inc. manufactures and sells sailboards. Management believes that the price elasticity of demand is -3.0.

[answerhappygod]

3-8. Sailright Inc. manufactures and sells sailboards.
Management believes that the price elasticity of demand is -3.0.
Currently, boards are priced at $500 and the
quantity demanded is 10,000 per year.
a. If the price is increased to 5606, how many sailboards will
the company be able
to sell each year?
b. How much will total revenue change as a result of the price
increase?
3-9 Demand for a softback managerial economics text is given by
Q=20,000-300P. The book is initially priced at $30.
a. Compute the point price elasticity of demand at P=$30
b. If the objective is to increase total revenue, should the
price be increased or decreased? Explain.
c. Compute the arc price elasticity for a price decrease from
$30 to $20.
d. Compute the arc price elasticity for a price decrease
from $20 to $15.
3-10. Write a demand equation for which the price elasticity of
demand is zero for all prices.
3-11. A consultant estimates the price- quantity
relationship for New World Pizza to be P = 50 - 5Q.
a. At what output rate is demand unitary elastic?
b. Over what range of output is demand elastic?
c. At the current price, eight units are demanded each period.
If the objective is
to increase total revenue, should the price be increased or
decreased? Explain.
3-12. The price elasticity for rice is estimated to be -0.4
and the income elasticity is 0.8. At a price of $0.40 per pound and
a per capita income of $20,000, the demand for rice is 50 million
tons per year.
a. Is rice an inferior good, a necessity, or a luxury?
Explain.
b. If per capita income increases to $20500. what will be
the quantity demanded of rice?
c. If the price of rice increases to $0.41 per pound and income per
capita remains at $20,000, what will be the quantity demanded?
3-13. Acme Tobacco is currently selling 5,000 pounds
of pipe tobacco per year. Due to competitive pressure, the average
price of pipe decline from $15 to $12. As a result, the demand
for Acme pipe tobacco increases to 6,000 pounds per year.
a. What is the cross elasticity of demand for pipes and pipe
tobacco?
b. Assuming that the cross elasticity does not change, at what
price of pipes would the demand for pipe tobacco be 3,000 pounds
per year? Use $15 as the
initial price of a pipe.
3-14, 3-14. The McNight company is a major producer of
steel. Management estimates that the demand for the company's steel
is given by the equation
Qs = 5,000 - 1,000Ps + 0.1I + 100Pa
where Qs is steel demand in thousands of tons per year,
Ps is the price of steel in dollars per pound, I is
income per capita, and Pa is the price of aluminum in dollars
per pound. Initially, the price of steel is $1 per pound, income
per capita is $20,000, and the price of aluminum is $0.80 per
pound.
a. How much steel will be demanded at the initial prices
and income?
b. What is the point income elasticity at the initial
values?
c. What is the point cross elasticity between steel and
aluminum? Are steel and aluminum substitutes or
complements?
d. If the objective is to maintain the quantity of steel
demanded as computed in part (a), what reduction in steel prices
will be necessary to compensate for a
$0.20 reduction in the price of aluminum?