Questions

select category from menu

News


House price latest

House price image

House prices up by 6.9%.

Read more
Model agencies collude to fix rates

Model agency image

Regulators find leading model agencies guilty of price fixing.

Read more

Price elasticity of demand

Question 1

Work out the PED for each, and comment on your result.

  1. The price of a smartphone is currently £200, and the quantity demanded is 4m. Next year the price falls to £180 and the quantity demanded rises to 6m.
  2. The price of pens today is £1, and the quantity demanded is 1m. Next year the price rises to £1.10 and the quantity demanded falls to 950,000.
  3. The price of a daily newspaper today is £1.50p, and the quantity demanded is 2m. Next year the price falls by 30p and the quantity demanded rises to 2.2m

Question 2

RCO Manufacturing is an electronics manufacturer and retailer. Its main products are ultrabook computers, PCs and calculators.  The current price of the ultrabook is £500, the PC is £800 and the calculator is £40. This year the firm sold 10,000 ultrabooks, 20,000 PCs and 1 million calculators.

In an attempt to improve revenue the managers of the firm have decided to increase all prices by 10%. Market research has suggested that the price elasticity of demand for each product is:

Ultrabook: (-) 1.5; PC : (-) 2.5; calculator:  (-) 0.6

You have been asked to evaluate the planned price increases.

  1. Comment on the planned price changes.

  2. Would a 10% price reduction have been better for some or all of the products?

  3. What benefit (if any) would advertising bring to the firm?

(You should support any arguments with calculations.)

Question 3

A local firm produces three types of pizza, for delivery to homes in the area. The owners have completed research, to discover the demand curves for each of the three pizzas. The schedules are shown below: (Quantities are per week).

Price Pizza A (Qd) Pizza B (Qd) Pizza C (Qd)
12 800 0 100
11 840 0 200
10 880 400 300
9 920 800 400
8 960 1200 500
7 1000 1600 600
6 1040 2000 700
5 1080 2400 800

Plot the three demand curves, on one graph.

  1. Calculate PED for all three pizzas over the price range £9 to £10.

  2. For pizza C only, what price must be charged if the firm wishes to maximize its sales revenue?

 

 


Alternative finance

alternative finance

Report on the growth of alternative finance.

Read more
GDP latest

GDP image

UK grows by 0.3% in 1st quarter of 2017.

Read more
Customs unions

Customs unions image

Costs and benefits of customs unions.

Read more
New materials

multiple choice

Multiple choice papers for Paper Three.

Read more
Brexit update

Article 50

What trading options are available to the UK?

Savings ratio

Savings ratio

Savings ratio falls to lowest level on record.

Read more

Tax avoidance

Double Irish - and a Dutch Sandwich more..

US rates

The OECD presents its final package for reform of international tax rules..more

Bank of England - cuts interest rates to 0.25%..more.

OECD - reducing income inequality will boost growth..more