Hotdogs are very cheap at the grocery store-about $2 for a package of 8, or 25 cents each. At a baseball game they cost $3 each. Use the concept of price elasticity of demand to explain why.
What will be an ideal response?
At the grocery store there are many substitutes for hotdogs, including other foods and restaurant meals. At the baseball game there are fewer substitutes for hot dogs, and even fewer substitutes that are hot since one cannot cook one's own food in the stadium. Therefore grocery store hotdogs likely have an elastic demand, which means lower prices maximize profit. Baseball game hotdogs have an inelastic demand, which means that higher prices maximize profit.
You might also like to view...
Firms should lower the prices on their goods
a. If the demand for the product is elastic b. If it acquires a firm selling a complement good c. If it acquires a firm selling a substitute good d. Both a and b
Describe the consumer equilibrium in the indifference curve/budget line model
What will be an ideal response?
The percentage change in quantity demanded divided by the percentage change in income is the formula for:
a. cross-price elasticity of demand. b. income elasticity of demand. c. elasticity of savings. d. wage elasticity of labor supply.
In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are
What will be an ideal response?