raw a market demand for a good that has many substitutes. You will recall that price elasticity of demand for a particular good or service is influenced by various factors, including whether the good or service under consideration has substitutes. Is this demand price elastic or inelastic? Why do you think this? Next draw a market demand for a good that has few substitutes. Is this demand price elastic or inelastic and why do you think this? With these two demand curves in mind, please answer the following questions: Discuss a real world example of each and explain why you think they are good examples of the two types of market demand. Why? If you wanted to increase revenue, which demand curve would you rather face as a company? Why? If the demand curves were linear, how would you modify your answer to the question above? (Hint: think about what happens to revenue across a linear demand curve.) Consider the market demand curve of a good with a lot of substitutes—perhaps the manufacturer of a particular fashionable smartphone. If an advertising campaign starred a famous actress with the aim of convincing people that this particular smartphone was a necessity, how might that change the shape of the market demand curve? What would this mean for the price elasticity of the good? Explain your conclusions.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 4.9P: (Other Elasticity Measures) Complete each of the following sentences: a. The income elasticity of...

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draw a market demand for a good that has many substitutes. You will recall that price elasticity of demand for a particular good or service is influenced by various factors, including whether the good or service under consideration has substitutes. Is this demand price elastic or inelastic? Why do you think this?

Next draw a market demand for a good that has few substitutes. Is this demand price elastic or inelastic and why do you think this?

With these two demand curves in mind, please answer the following questions:

Discuss a real world example of each and explain why you think they are good examples of the two types of market demand. Why?
If you wanted to increase revenue, which demand curve would you rather face as a company? Why?
If the demand curves were linear, how would you modify your answer to the question above? (Hint: think about what happens to revenue across a linear demand curve.)
Consider the market demand curve of a good with a lot of substitutes—perhaps the manufacturer of a particular fashionable smartphone. If an advertising campaign starred a famous actress with the aim of convincing people that this particular smartphone was a necessity, how might that change the shape of the market demand curve? What would this mean for the price elasticity of the good? Explain your conclusions.

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