The Demand Curves for Good a and Good B Are

question 109

Essay

The demand curves for Good A and Good B are given by
Q_a = 100 - P_a and Q_b = 50 - 0.2P_b,
where Q_a is the quantity demanded of Good A, P_a is the price of Good A, Q_b is the quantity demanded of Good B, and P_b is the price of Good B.
a. Graph the demand curve for both goods.
b. Which demand curve is more elastic?
c. If the price of both goods increases from $50 to $60, what happens to total revenue in each market?
d. Use the midpoint formula to calculate the elasticity of demand for both goods resulting from the price change in part c.
e. What do your elasticity of demand calculations in part d tell you about the elasticity of demand for Goods A and B?

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Definitions:

Vertical Integration

The combination of two or more stages of production or distribution managed by a single company to increase control and reduce costs along the supply chain.

Horizontal Integration

A business growth strategy through acquiring or merging with competitors in the same industry at the same stage of production.

Horizontal Contracts

Agreements or cooperations between businesses that operate at the same level in the supply chain, often for mutual benefit or to reduce competition.

Customers' Goals

The objectives or desired outcomes that customers aim to achieve through purchasing goods or services.