Question

PRINT YOUR NAME (LAST (FIRST) THE INFORMATION IN THE PRECEDING EXAMPLES INDICATES THAT. AS ONE MOVES TO THE RIGHT ALONG A DOWNWARD SLOPING STRAIGHT LINE DEMAND CURVE A demand increases B. the quantity demanded falls C. the curve comes more elastic D. the curve becomes more inclastic Now, the dog work over, can you use the concept of price elasticity of demand to throw some light on the following four real world cases? Case I: The X Telephone Company asked the Publie Service Commission for permission to increase rates by 205 The phone company argued that declining revenue made this rate in essential Opponents of the rate increase contended that the phone company's revenues would fall because of the rate hike. Which of the following best interprets the information given? A The phone company felt that the demand for telephone service was elastie and the opponents of the rule increase felt it was inclastic B. The phone company felt that the demand for telephone service was inclastic and the opponents of the role in Ict was este C Both ups felt that the dom e stic but for dificil D. Both groups felt that the demand was inclastic, but for different reasons Case 2: This case is based on the following numbered sentences (1) Ten years ap. XYZ university built a new hasketball facility which tripled the seating availability for basketball fans 02 Since the new facility was built the hackathall team won two NCAA Championships and several Conference titles. (3) Tickets cost thirteen dollars (4) A marketing survey shows that the University's gate receipts would be higher if it charged higher prices, even though the number of tickets sold would fail What if anything.dees senience (4) imply about the price elasticity of demand? A Demand is clastic 3. Demand is inclastic C. Demand is a unit clasticity. D. It implies nothing about clasticity of demand. Case 3: Read the newspaper clipping on the next page and answer these questions: What does his clipping say about the price clasticity of demand for Saturday bus service in New Albany Indiana, during the month of August, 1972? Explain.

Answer 1

Q1 is incomplete Rest of the questions are answered. Case 1. Correct option: (B) The phone company felt that the demand for telephone services was inelastic and the opponents of the rate increase felt it was elastic Reason: In case of inelastic demand, a change in price leads to a less than proportionate change in quantity demanded in opposite direction. TR increases as price increases In case of elastic demand, a change in price leads to a more than proportionate change in quantity demanded in opposite direction. TR decreases as price increases This is why, telephone companies believed demand was inelastic in nature and increasing price would lead to increase in TR. However, opponents believed demand was elastic and thus increasing P would lead to fall in TR Case 2. Correct option: (B) Demand is inelastic Reason: In case of inelastic demand, a change in price leads to a less than proportionate change in quantity demanded in opposite direction. TR increases as price increases In the given case, it is believed that increase in P would lead to increase in TR (although Q falls). This means increase in P> fall in Q. This implies inelastic demand.