Economics:Demand and supply,price elasticity.
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1. Determine the price elasticity of demand at each quantity demanded using the formula: Percentage change in quantity demanded = (Q2-Q1)/Q1 divided by percentage change in price = (P2-P1)/P1
b. Redo exercise 1a using price changes of $10 rather than $5
c. Plot the price and quantity date given in the demand schedule. Indicate the price elasticity value at each quantity demanded. Explain why the elasticity value gets smaller as you move down the demand curve.
D. Plot the total revenue curve directly below the demand curve plotted. Measuring total revenue on the vertical axis and quantity on the horizontal axis.
E. What would a 10% increase in the price of movie tickets mean for the revenue of a movie theater if the price elasticity of demand was .1, .5, 1.0 and 5.0?
F. Using the demand curve plotted illustrate what would occur if the income elasticity of demand was .05 and income rose by 10%. If the income was elasticity was 3.0 and income rose by 10% what would occur?
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Solution Summary
The problem set requires the determination of price elasticity at different levels of pricing.
Education
- B. Sc., University of Nigeria
- M. Sc., London South Bank University
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