Apple just announced it will be coming out with the newest model iPhone in the next six months. One could reasonably expect demand for the current model of iPhone to:
A. decrease due to a change in expectations of future prices.
B. increase due to a change in expectations of future prices.
C. increase due to limited supply of the current model.
D. decrease due to the change in price of a substitute good.
A. decrease due to a change in expectations of future prices.
You might also like to view...
Which one of the following benefits would be most difficult to quantify accurately using economic valuation?
A) The benefits of a ski resort to skiers B) The benefits of harvesting trees to a timber company C) The benefits of biodiversity to indigenous people D) The benefits of health insurance E) The benefits of technological improvements
The Mass Rapid Transit (MRT) System in Hong Kong has been running significant losses. Transport Ministry officials have argued over whether to raise fares to combat the losses
One argument against a fare increase is that it will aggravate traffic congestion on the streets during peak commuter hours. Suppose that the current fare is $4 and the government is considering raising it to $6. Officials estimate that this reduces the number of rides purchased from 10,000 to 8,000 per day. a. Using the midpoint formula, what is the estimated elasticity of demand for MRT rides? b. What does this elasticity of demand suggest to you about what will happen to total revenue earned by the transit system if the fare increase happens? c. Last year, the MRT system incurred a loss of $50,000 per day. Do you think the fare increase will resolve the deficit problem as well as Ministry officials anticipate? Explain.