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# Price Elasticities - Popcorn

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Economists estimate price elasticities more precisely using average price and quantity to computer percentage changes. Thus,

Using this formula, compute E for a popcorn price increase from 15 cents to 25 cents per ounce (Figure 4.5 on page 85).
Problem 4
Supply Decisions and Costs.
a. Complete the following table.
Rate of Output Total Cost Marginal Cost Average Cost
0 \$100
1 \$110
2 \$130
3 \$165
4 \$220
5 \$300

b. What is the value of fixed cost?
c. On a graph, depict marginal cost and average total cost making sure to label both cost curves on the graph. (Hint #1: You will need to calculate the columns of MC as is done on page 105 and ATC curves on page 103). (Hint #2: The total cost, total total fixed and total variable cost curves are much larger than the MC and ATC curves and do not belong on the same graph).

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#### Solution Preview

The response addresses the query posted in 247 words with APA References

//The following calculation is based upon price elasticity of demand which is derived by formula based on quantity and price of a commodity. In the calculations below, the price elasticity of popcorn has been depicted that calculated on the basis of the current and previous quantity demanded and current and previous price of commodity.//

Ans1. The basic formula for elasticity of demand is (Mankiw, ...

#### Solution Summary

The solution addresses the query posted in 247 words with APA References, calculations and graphs

\$2.19