Economic Week 2 Homework Assignment

Assignment#1, Due Sat May 20 2017 Complete the following questions in a Word document: Ch. 3 Technical Questions 1 and 3 Ch. 3 Application Questions 1 and 3, Ch. 4 Technical Questions 1 and 2 Ch. 4 Application Question 4. Chapter 3 TQ #1. For each of the following cases, calculate the arc price elasticity of demand and state whether demands is elastic inelastic or unit elastic. a. When the price of milk increases from $2.25 to $2.50 per gallon, the quantity demanded falls from 100 gallons to 90 gallons. b. When the price of paperback books falls from $7.00 to $6.50 the quantity demanded rises from 100 to 150. c. When the rent on apartments rises from $500 to $550 the quantity demanded decreases from 1000 to 950. TQ#3. For each of the following cases what is the expected impact on the total revenue of the firm? Explain your reasoning. a. Price elasticity of demand is known to be -0.5 and the firm raises price by 10 percent. b. Prices elasticity of demand is known to be -2.5 and the firm lowers price by 5 percent. c. Price elasticity of demand is known to be -1.0 and the firm raises price by 1 percent. d. Price elasticity of demand is known to be 0 and the frim raises price by 50 percent. AQ#1. In March 2010, Mc Donald’s Corp. announced a policy to increase summer sales by selling all soft drinks, no matter the size, for $1.00. The policy would run for 150 days starting after Memorial Day. The $1.00 drink prices were a discount from the suggested price of $1.39 for a large soda. Some franchisees worried that discounting drinks, whose sales compensate for discounts on other products, could hurt overall profits, especially if customers bought other items from the Dollar Menu. McDonald’s managers expected this promotion would draw customers from other fastfood chains and from convenience stores such as 7-Eleven. Additional customers would also help McDonald’s push its new beverage lineup that included smoothies and frappes. Discounted drinks did cut into McDonald’s coffee sales in previous years as some customers chose the drinks rather than pricier espresso beverages. Other chains with new drink offerings, such as Burger King and Taco Bell, could face pressure from the $1.00 drinks at McDonald’s. a. Given the change in price for a large soda from $1.39 to $1.00, how much would quantity demanded have to increase for McDonald’s revenues to increase? (Use the arc elasticity formula for any percentage change calculations.) b. What is the sign of the implied cross-price elasticity with drinks from McDonald’s competitors? c. What are the other benefits and costs to McDonald’s of this discount drink policy?

Chapter4 TQ#1. In each of the following examples, describe how the information given about consumer demand helped managers develop the appropriate strategies to increase profitability and how this information was obtained: a. Auto industry executives have begun to focus attention on their 20-, 30-, and 40-year-old customers, known as Generations X and Y, and away from the Baby Boomer generation. Recognizing that baby boomers are at least 60 years old, managers realize that their future depends on adapting to the tastes of younger generations. The auto industry is now offering more smartphone-driven multimedia systems and is considering increased use of autonomous driving capability. Luxury car producers are developing less-expensive models, and companies such as Toyota are redesigning their cars to be more compact, efficient, and sporty. b. Companies such as Procter & Gamble Co., Unilever PLC, and Kimberly Clark Corp. are now using retina-tracking cameras to test consumer responses to new products. Kimberly Clark wanted to know which designs on its Viva paper towels were noticed in the first 10 seconds a customer looked at a shelf. This is the period when shoppers typically place items in their carts. Research has shown that what people want to do and what they say they want to do are often quite different. Companies are making increased use of this technology and three-dimensional computer simulations of product designs due to the lower costs of this technology. c. Anheuser-Busch InBev NV and other beer producers are trying to win back customers who have switched to smaller brewers or to liquor. Anheuser launched Bud Light Platinum with a 6 percent alcohol content compared with 4.2 percent in Bud Light. Platinum is sweeter and sold in a cobalt blue bottle designed to be more popular in bars where much of this beer is sold. The company experiments with three new beers each day in its research brewery. Anheuser is also developing new products such as Bud Light Lime-a-Rita, which tastes like a margarita, and a tea-and-lemonade drink and a cider, each containing 4 percent alcohol. The company is using its Clydesdale horses to bring more free beer samples to festivals and fairs. TQ#2. The following figure plots the average farm prices of potatoes in the United States for the years 1989 to 1998 versus the annual per capita consumption. Each point represents the price and quantity data for a given year. Explain whether simply drawing the line that approximates the data points would give the accurate demand curve for potatoes. AQ#4. How does the empirical analysis of automobile demand presented in this chapter illustrate the fact that only do consumers consider the monetary price of purchasing price of purchasing as automobile but also they are sensitive to others costs or the full price of the purchase?

AQ#3. Based on the elasticity data in Table 3.7, discuss why public health officials generally advocate the use of cigarette taxes to reduce teenage smoking while state and local governments often use these taxes to raise revenue to fund their services.

Assignment #2, Due Sat, May 20 2017 Notify the instructor of the industry you will analyze for the final paper. A successful submission should be a minimum of one well-formed paragraph (5 or more complete sentences) and include at least one quality source you intend to use for the project. For more information on the final paper, go to the assignment: Indvidual Industry Analysis.

Assignment #3 Due Saturday, May 20 2017 For the article summary you should Locate a article from a peer reviewed journal that deals with an application of elasticity concepts. Prepare a written case analysis of the article. This analysis should include a summary of the article as well as an analysis using what you have learned in the course. The article summary should be APA formatted with a cover page and reference page (no abstract necessary).  Be sure to properly cite your source(s) on the reference page as well as in the paper as you use them. Your summary and analysis should be 2-3 pages not including the reference sheet and cover page. Review the grading rubric to make sure you fully understand what the criteria for the assignment are.

Assignment #4 Due Wed, May 17 2017 After reading Chapters 3 and 4, particularly the material related to the methods for determining consumer demand and behavior, consider data mining. One of the major changes in understanding consumer behavior has been data mining by large corporations. Many companies track all purchases of each consumer and then target special advertising based on purchasing habits. In the future, consumers may have their cell phones alerted to special deals the moment they enter a store. Many retailers now have special cards that gather more information about their customers so they can more accurately promote. Do you have concerns about corporate collection of this type information or do you accept it as inevitable? Do you see value to you of providing this type information to retailers? Please watch video for an overview of data mining. https://youtu.be/R-sGvh6tI04  (Links to an external site.) Links to an external site.

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