In the supermarket MicroPrice, CocaCola
and PepsiCola
both sell for $.80/can each. Also, the average weekly sales of
CocaCola
and Pepsi are 4000 and 3000 cans respectively. Further, when PepsiCola
introduced a promotional campaign
selling Pepsi at $.50/can for one week, the sales for both products were as follows. CocaCola
sold 3400 cans, while Pepsi
sold 4400 this particular week. Based on the above information, please answer the following questions:
1) Estimate the price elasticity of demand for PepsiCola.
2) Estimate the price elasticity of demand for CocaCola.
3) How would you term this demand for Pepsi and CocaCola,
price elastic, price inelastic, otherwise? Please explain.
4) Estimate the change in the total revenues of PepsiCola.
5) Estimate the cross elasticity of demand for Pepsi and CocaCola.
6) Are Pepsi and CocaCola
complementary, substitute, or not related products? Please explain.
Problem 2:
The research department of the COLLEGE STUDENT BLUEJEANS
has estimated the income elasticity of demand for bluejeans
of the Gap Corporation to be 1.4. Further, most economic forecasts predict a 4.5% increase in incomes for students
during the upcoming year. If among the bluejeans
sold to college students last year, 820,000 were of the Gap brand, please
estimate the number of additional bluejeans
that Gap expects to sale in the upcoming year. Further, if the Gap Corporation
has estimated that, on the average, one sales person is needed for every 800 bluejeans
sold annually, please estimate the
number of additional sales persons Gap needs to hire in the upcoming year.
Problem 3:
When the price of gasoline increased from 3 to 4 dollars per gallon, the demand for gasoline decreased from 100,000
gallons to 90,000 daily. Also, the demand for a $50,000 SUV dropped from 3000 to 2500 cars per month. Based on the
above please answer the following questions:
1) Estimate the price elasticity of demand for gasoline.
2) Estimate the price elasticity of demand for SUVs.
3) How would you term this demand for gasoline, price elastic, price inelastic, otherwise? Please explain.
4) Estimate the change in the total revenues of gasoline.
