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Elasticities and Price of Demand and Supply

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

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Solution Preview

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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