1. If a 1% fall in the price of a product cause the quantity demanded of the product to increase by 2%, demand is
(a) inelastic
(b)elastic
(C) unit elastic
(D) perfectly elastic

2.The minimum acceptable price for a product that Juan is willing to receive is $20. It is $15 for Carlos. The actual price they receive is $25. What is the amount of the producer surplus for Juan Carlos combined?
10, 15, 20 or 25 dollars.

3. Compared to the lower-right portion, the upper-left portion of most demand curves tends to be
(a) more inelastic
(b) more elastic
(c)unit elastic
(d) perfectly inelastic

4. Katie is willing to pay $50 for a product and Tom is willing to pay $40. The actual price that they have to pay is $30. What is the amount the consumer surplus for Katie and Tom combined. $30, $40, $50 or $60

5. If when the price of a product rises for m$1.50 to $2, the quantity demanded of the product decreases from 1000 to 900, the price elasticity of demand coefficient, using the midpoint formula is
(a)3
(b)2.71
(c)0.37
(D)0.33

Please refer attached file for complete solution. Expressions typed with the help of equation writer are missing here.

Solutions:

1.
Change in prices=-1% (negative sign indicates fall)
Change in quantity demanded=2%
Price elasticity of demand=Change in quantity demanded/change in prices=2%/(-1%)=-2
Absolute value of price ...

Solution Summary

There are 5 short answer type problems. Solution to each problem depicts the step by step methodology to reach the final answer.

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