1. Opportunity costs are most simply defined as cost in terms of foregoing alternatives. This means what you potentially lose in making a choice for one thing in a decision. Stella would need to be aware that whatever resources she allocates to paying for the new car, will be removed from using them for other purposes. She should consider how much the car will cost in comparison with the other uses for her funds combined with the cost of another means of transportation. In short, for this to be a good choice, the cost of the car should be lower than the cost of the alternative uses + the cost of alternate transportation if she wishes to maximize this decision. http://wordnetweb.princeton.edu/perl/webwn?s=opportunity%20cost 2. …show more content…
. You are the manager for Dunkin Donuts and know the following elasticities:
η= 1.5 η I = 1.2 η xy1 = 0.5 η xy2 = -0.5
η is the price elasticity of demand for Dunkin Donuts (DD) glazed doughnuts, ηxy1 is the cross elasticity of demand between DD glazed doughnuts and Krispy Kreme (KK) glazed doughnuts, ηxy2 is the cross elasticity of demand between DD glazed doughnuts and DD French Vanilla coffee, and η I is the income elasticity of DD glazed doughnuts.
6. A. P elas = Percent change in Q / Percent change in P. We should raise prices by 20%
6. B. Since revenue is the product of p and q, it should rise just as price and quantity have risen (p elas is positive).
6. C. 0.5 = Percent change in Q of DD / Percent change in p