What is percent change?

ECO550

© 2020 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University.

Page 1 of 1

Problem Set 2 Handout

These problems will serve as the basis for the Week 6 quiz. These problems are the background you will use on the quiz, but please note you will NOT be provided with this document in the quiz, and the questions here may not exactly be replicated on the quiz. Doing the problems will build your understanding.

Begin working on this Problem Set Handout in Week 4 to prepare for the quiz in Week 6.

1) Just a year after you launched the expansion of DWJ, inflation has raised your marginal cost by 7% from $198.33 to $212.21. Your elasticity varies for each of the three regions in which you sell your DWJ brand. In the southwestern region, your price elasticity of demand is -2.76. In your upper-western region, your price elasticity of demand is -3.50. In your New England- region, the price elasticity of demand is -5.76.

Estimate the percentage change in quantity demanded if you were to raise prices in all three regions by 7%.

Use %ΔQd/%ΔP = e to complete the estimate:

a. %ΔQd southwestern

b. %ΔQd upper western

c. %ΔQd New England

2) Given the above predicted changes in quantity demanded by region, use the stay even analysis %ΔQd = %ΔP/(%ΔP +margin): Can you raise prices by 7% in any of the regional markets? State your conclusion and then show the all the steps supporting your conclusion.