Figure: IPod Consumers

question 119

Essay

Figure: iPod Consumers
A local electronics store sells iPods for $100 per unit. The manager who took a lesson from his economics course in college decides to offer a 20 percent discount to students who can present their current student ID at purchase. Given the demand curves for regular and student customers, answer the following questions.
a. What will be the total revenue for both groups of customers if the store offers the discount?
b. For which group of customers is the demand more elastic?
c. What is the elasticity of demand between the prices of $100 and $80 in the regular market?
d. What is the elasticity of demand between the prices of $100 and $80 in the student market?
e. If the manager increases the regular price of iPods to $120 and lowers the discount price to $70, how much could the store increase total revenues?

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Definitions:

Employer

An individual or entity that hires and pays people to perform jobs or services.

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A measure of an individual's or family's economic and social position relative to others, based on income, education, and occupation.

Public Housing

Government-provided housing aimed at offering affordable living spaces to individuals and families with low to medium income.