1. How would the price elasticity equation apply to the purchaseprice of (a) gasoline, (b) an airline ticket, and (c) a checkingaccount?
Give examples of situations that would affect this equation.
2. What would be your response to the statement, "profitmaximization is the only legitimate pricing objective for thefirm."?
3. A marketing manager reduced the price on a brand of cereal by10 percent and observed a 25 percent increase in quantity sold. Themanager then thought that if the price were reduced by another 20percent, a 50 percent increase in quantity sold would occur. Whatwould be your response to the marketing manager's reasoning?
