Question

1. For each of the following demand functions, calculate price elasticity at the particular price value and specify whether demand at that price is elastic, inelastic, or unit elastic:

A.Q= 60 -3p, at p=10

B.Q=60- 3p, at p=20

C.Q=20/p, at p=10

D.Q=20/p, at p=20

E.Q=5/p, at p=25

2.Consider the Cobb Douglas production function f(x1,x2)=(4x1^1/3)(X2^2/3)

A.Calculate the marginal product of factor 1(MP1) and the marginal product of factor 2 (MP2) in this function.

B.Calculate the technical rate of substitution (TRS) of this function.

C.Show mathematically what happens to output if we double the quantities x1 and x2. Based on what you find, does this function exhibit decreasing, constant, or increasing returns to scale?

Answer 1