Five Brief Scenarios Are Presented Below

question 12

Essay

Five brief scenarios are presented below. Apply the correct elasticity term to each scenario and explain your answer.
(a) John must have an appendectomy. Upon arriving at the hospital he is told that for this week only they are doing abdominal operations at half price. Even in the face of a 50 percent price cut, John insists that he wants only one operation.
(b) Apple announces that it is willing to sell as many model 3000 computers as are ordered at a fixed price of $500 per unit.
(c) Northwest Airlines increased all its fares by 25 percent. As a result the number of passengers declined by 25 percent and the total revenue of Northwest Airlines remained the same.
(d) Newsweek magazine raised its price to annual subscribers by 50 percent. As a result annual subscriptions fell by 30 percent. Although it lost some readership, Newsweek significantly increased its revenues.
(e) The price of soybeans went up by 60 percent. In response farmers planted more soybeans and output increase by 70 percent.

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Definitions:

Labor Market

An economic marketplace that matches potential employers with employees based on their skills, job requirements, and wage expectations.

Wage

The amount of money that is paid to an employee by an employer, typically in exchange for the employee's labor, calculated on an hourly, daily, or piecework basis.

Value of Marginal Product

The additional revenue generated by employing one more unit of a factor of production, holding all other factors constant.

Profit

The financial gain achieved when the revenue earned from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.