# 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

#### 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.