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Homework answers / question archive / DeVry University, Chicago ECON ECON312 chapter 7 1)The owner of a health club asks you for advice about whether the company should raise or lower the price of its membership this year based on the following information:  last year the club raised the price of its membership by 5% and the number of members paying the same fee fell by 7%

DeVry University, Chicago ECON ECON312 chapter 7 1)The owner of a health club asks you for advice about whether the company should raise or lower the price of its membership this year based on the following information:  last year the club raised the price of its membership by 5% and the number of members paying the same fee fell by 7%

Economics

DeVry University, Chicago

ECON ECON312

chapter 7

1)The owner of a health club asks you for advice about whether the company should raise or lower the price of its membership this year based on the following information:  last year the club raised the price of its membership by 5% and the number of members paying the same fee fell by 7%.

 

 

2. Ford Motor Company announced a major rebate program for its cars and trucks. The rebate program amounts to a simple reduction in price. The company executives hope to increase revenue as a result of this rebate program. What economic explanation would justify this decision?

 

 

3. The president of the Micro Brewing Corporation asks you, as the company economist, to forecast changes in consumer beer purchases associated with a proposed price change. You conduct a survey and find that if the price of a six-pack increases from $5.50 to $7.50, the quantity demanded will decrease from 2,200 units to 1,800 units a month. Should the Micro Brewing Corporation raise its price? Explain the economic basis for this recommendation to the president.

 

 

  1. Based on the determinants of elasticity as discussed in the text, explain what the price elasticity of demand of the following products would be: (a) ballpoint pens; (b) Crest toothpaste; (c) diamond rings; (d) sugar; and (e) refrigerators.

 

 

  1. Federal and state governments often seek to raise tax revenue by levying excise or sales taxes on specific products. What economic factors should be considered in determining the products that will raise the most tax revenue? Give examples of products in your answer.

 

 

  1. Explain the perspective that tougher enforcement of drug laws for cocaine or other drug laws may actually increase the crime rate. Use the concepts of demand, supply, and elasticity in your explanation.

 

 

  1. Discuss the pros and cons of legalizing drugs such as heroin or cocaine from an economic perspective using the concepts of supply, demand, and elasticity.

 

 

 

8. Why would it be valuable for a business to know the cross elasticity of demand for the two products it produces: peanuts and popcorn?

 

 

9. What is a price ceiling and what are its economic effects?

 

 

10. What is a price floor and what are its economic effects?

 

 

11. (Last Word) Use economic analysis to explain why tenants in New York City who are covered by rent-controlled laws do not want to move even when they are offered a large buyout.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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