(a) In a small city, Company X is one of the many companies selling running shoes....
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(a) In a small city, Company X is one of the many companies selling running shoes. Suppose the table below shows the demand-and-supply schedule of running shoes of Company X before the outbreak of COVID-19. Price ($) 300 350 400 450 500 550 Quantity demanded (number of pairs) 8,000 7,000 6,000 5,000 4,000 3,000 Quantity supplied (number of pairs) 6,500 7,000 7,500 8,000 8,500 9,000 (i) Use mid-point method to calculate the price elasticity of demand of running shoes of Company X between the price range of $350 and $450. Show your workings and round your answers to 2 decimal places. (6 marks) (ii) Identify and justify the type of price elasticity of demand of the market for running shoes of Company X. (4 marks) (b) After the outbreaks of COVID-19, many medicine journals found that people who engage regular physical activity are less likely to end up in the ICU or die from COVID-19. It helps people fight off viral infections by strengthening their immune system, heart, and lungs. At the same time, the sales manager of Company X recommends to adjust the price of running shoes upward from $350 to $450 because of raising shipping cost. (i) Base on the information and your answer in part (a) only, what conclusion you can make on the change of total revenue of running shoes sold by Company X after the price adjustment suggested by its sales manager? Neither verification nor diagram is needed. (3 marks) (ii) Suppose Tommy decided to buy a pair of running shoes from company X before the outbreak of COVID-19. Base on all the above information and the rule of rational choice, Tommy decided not to buy a pair of running shoes from Company X after the price adjustment. How could this happen? Explain. (5 marks) (a) In a small city, Company X is one of the many companies selling running shoes. Suppose the table below shows the demand-and-supply schedule of running shoes of Company X before the outbreak of COVID-19. Price ($) 300 350 400 450 500 550 Quantity demanded (number of pairs) 8,000 7,000 6,000 5,000 4,000 3,000 Quantity supplied (number of pairs) 6,500 7,000 7,500 8,000 8,500 9,000 (i) Use mid-point method to calculate the price elasticity of demand of running shoes of Company X between the price range of $350 and $450. Show your workings and round your answers to 2 decimal places. (6 marks) (ii) Identify and justify the type of price elasticity of demand of the market for running shoes of Company X. (4 marks) (b) After the outbreaks of COVID-19, many medicine journals found that people who engage regular physical activity are less likely to end up in the ICU or die from COVID-19. It helps people fight off viral infections by strengthening their immune system, heart, and lungs. At the same time, the sales manager of Company X recommends to adjust the price of running shoes upward from $350 to $450 because of raising shipping cost. (i) Base on the information and your answer in part (a) only, what conclusion you can make on the change of total revenue of running shoes sold by Company X after the price adjustment suggested by its sales manager? Neither verification nor diagram is needed. (3 marks) (ii) Suppose Tommy decided to buy a pair of running shoes from company X before the outbreak of COVID-19. Base on all the above information and the rule of rational choice, Tommy decided not to buy a pair of running shoes from Company X after the price adjustment. How could this happen? Explain. (5 marks)
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Related Book For
International Financial Management
ISBN: 978-0132162760
2nd edition
Authors: Geert Bekaert, Robert J. Hodrick
Posted Date:
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