Streaming services and TV sets: complements
Streaming services and movie tickets: substitutes
TV sets and movie tickets: substitutes
Answer:
Required return 10.27%
Dividend yield 5.77%
Expected capital gains yield 4.5%
Explanation:
Calculation for required return using this formula
A. R = (D1 / P0) + g
Let plug in the formula
Required return = ($2.30 / $39.85) + .045
Required return = .1027*100
Required return= 10.27%
Therefore Required return is 10.27%
Calculation for dividend yield using this formula
Dividend yield = D1 / P0
Let plug in the formula
Dividend yield = $2.30 / $39.85
Dividend yield = .0577*100
Dividend yield = 5.77%
Therefore Dividend yield is 5.77%
Calculation for the expected capital gains yield
Using this formula
Expected capital gains yield=Required return-Dividend yield
Let plug in the formula
Expected capital gains yield=10.27%-5.77%
Expected capital gains yield=4.5%
Therefore Expected capital gains yield is 4.5%
Answer:
2.2
Explanation:
The formula for calculating price elasticity using the midpoint method is:
midpoint method = {(Q2 - Q1) / [(Q2 + Q1) / 2]} / {(P2 - P1) / [(P2 + P1) / 2]}
midpoint method = {(150 - 100) / [(150 + 100) / 2]} / {(1.20 - 1) / [(1.20 + 1) / 2]}
midpoint method = [50 / (250 / 2)] / [0.20 / (2.20 / 2)] = (50 / 125) / (0.20 / 1.1)
midpoint method = 0.4 / 0.19 = 2.2
The advantage of using the midpoint method to calculate price elasticity is that we can calculate the price elasticity between two points, and it doesn't matter if the price increases or decreases.
If we calculate price elasticity using the single point formula:
price elasticity = % change in quantity supplied / % change in price = 50% / 20% = 2.5
Answer:
Equilibrium quantity: 145
Equilibrium price: $140
Explanation:
In order to find the answer, first we determine the current difference between quantity supplied and quantity demanded.
Quantity supplied - quantity demanded = difference
125 - 165 = -40
So we have a shortage of -40 units.
We have the information that a $1 increase in price increases supply by 2, and decreases demand by 2. Thus, in order to close the shortage, we need a $10 price increase, because this will raise supply by 20 units, and lower demand by 20 units as well, bringing the 40 gap to 0.
For this reason, the equilibrium quantity is 145 units, and the equilibrium price is $140.
