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SCORPION-xisa [38]
2 years ago
13

When the price of a candy bar is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demand

ed increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is
a. inelastic
b. elastic
c. unit elastic
d. perfectly inelastic
Business
1 answer:
spayn [35]2 years ago
6 0

Using the midpoint method, we know that the demand for candy bars is <u>a. inelastic</u>.

<u>Explanation</u>:

The demand is said to be inelastic when the demand for the goods and services does not change with the change in price.

When the price of the product increases and there is no reduction in the demand of the product is known as inelastic demand. The demand tends to be inelastic for the daily use and necessary goods and services.

Elasticity can be computed with the help of the midpoint method as it gives the result regardless of the direction of change.

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Answer:

= $132,000.

Explanation:

There are two types of fixed costs, general fixed cost and specific fixed cost.

<u><em>General fixed costs </em></u><em>are those that cannot be traced to a specific product rather they are incurred for the benefit of all of the product being produced. For example,the rent of the factory where three products are being produced</em>

So they are unavoidable should a product be ceased for production that is they would still be incurred either way.

<u>S</u><u><em>pecific fixed costs </em></u><em>are those incurred specifically for a particular product and as such they would be saved should the product be discontinued. For example , if a special machine  that cost $4000 a month to rent is used to produce a product. The $4000 would be saved should the production of the product ceases</em>

The net operating cost of the company would increase by the amount of the avoidable specific fixed cost:

=$90,000 + $42,000

= $132,000.

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