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Individual problem 6-1: George has been selling 5,000 T-shirts per
month for $8.50. When he increased the price to $9.50 he sold only
4,000 T-shirts.
a) What is the demand elasticity?
b) If his marginal cost is $4 per shirt, what is his desired markup and
what is his initial actual markup?
c) Was raising the price profitable?
Individual problem 6-3: To conduct an experiment, AMC increases
movies tickets from $9 to $10 and measured the change in ticket sales.
Using the data over the following month, they concluded that the
increase was profitable. However, over the subsequent months, they
changed their monds and discontinued the experiment. How did the
timing affect their conclusion about profitability of increasing prices?
Individual problem 6-5: An end-of-aisle price promotions changes the
price elasticity of a good from -2 to -3. If the normal price $10,what
should be the promotional price be?
Salvatore’s Chapter 5:
Problems: 8, 15(b) and (c), and appendix problem 2 (p. 215).
Problem 8: In a study published in 1980, B.B. Gibson estimated the
following price and income elasticities of demand for six types of
public goods.
a) Do these public goods conform to the law of demand? For which
public goods is demand price elastic?
b) What types of good are these public goods?