Question

17. The current price for a good is $20, and 100 units are demanded at that price. The price elasticity of demand for the good is -1. When the price of the good drops by 10% to $18, consumer surplus:
Increases or decreases by $__?

Answer 1

Demand for bikes has suddenly increased, and the market price has risen from $50 to $60.
In three to five sentences, explain how this change will affect profits.

Answer 2

the profit will decrease after a certain price at a higher rate. this means more bikes will need to be produced?

Answer 3

If the market price of bikes rises from $50 to $60, then the company will want to produce a larger quantity of bikes. This is because the overall marginal revenue is now higher and will be maximized differently. Before profit was maximized at six bikes, now the profit will be maximized by producing more bikes, perhaps seven.

Answer 4

Demand for bikes has suddenly increased, and the market price has risen from $50 to $60.

In three to five sentences, explain how this change will affect profits.