The owner of Grand Central Bookstore is looking into the sales of its Health & Fitness magazine
Question:
The owner of Grand Central Bookstore is looking into the sales of its Health & Fitness magazine section. She finds that her equilibrium is at 800 magazines per month sold at an average price of $4.75 per magazine. When the price of these Health & Fitness magazines rose to $5.00 each, the quantity sold fell to 725 magazines per month, while the quantity supplied to her increased to 900 a month. From the scenario described, answer the questions below. (40 points)
a. Draw an appropriate graph for Grand Central’s Bookstore to illustrate this change in the Health & Fitness magazines market position when the price rises to $5.00. (10pts)
b. Calculate the price elasticity of demand for the Health & Fitness magazines between prices $4.75 and $5.00. Is it elastic or inelastic? How do you know? (10pts)
c. Calculate the price elasticity of supply for the Health & Fitness magazines between prices $4.75 and $5.00. Is it elastic or inelastic? How do you know based on your answer? (10pts)
d. The owner also noticed that when she ran a 20% discount on the Health & Fitness magazines the number of nutritious snack bars sold at the checkout register increased by 15%. Calculate the cross elasticity of demand between the two goods. Based on your answer, are they substitute or complements? Explain why. (10pts)
Accounting What the Numbers Mean
ISBN: 978-0073527062
9th Edition
Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,