Managerial Economics Problem # 1


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Managerial Economics Problem # 1 2 answers below » The accompanying chart presents data on the price of fuel oil, the quantity demanded of fuel oil, and the quantity demanded for insulation. Fuel Oil Insulation Price per Gallon Quantity Demanded (millions of gallons) Quantity Demanded (millions of tons) $3.00 100 30 $5.00 90 35 $7.00 60 40 a. Calculate the price elasticity (arc elasticity) of demand for fuel oil as its price rises View complete question » The accompanying chart presents data on the price of fuel oil, the quantity demanded of fuel oil, and the quantity demanded for insulation. Fuel Oil Insulation Price per Gallon Quantity Demanded (millions of gallons) Quantity Demanded (millions of tons) $3.00 100 30 $5.00 90 35 $7.00 60 40 a. Calculate the price elasticity (arc elasticity) of demand for fuel oil as its price rises from $3.00 to $5.00; from $5.00 to $7.00. Calculate the change in total revenue in the two cases. Explain how the changes in revenue relate to your estimated elasticities. b. Calculate the arc cross elasticity of demand for insulation as the price of fuel oil rises from $5.00 to $7.00. Are fuel oil and insulation substitutes or complements? Explain. View less » Nov 13 2014 02:20 AM

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