Question

Using the Midpoint method compute the elasticity in the following cases and explain your answers.

Price |
Quantity Demanded (Income = AED60,000) |
Quantity Demanded (Income = AED90,000) |

50 |
2000 |
1500 |

75 |
1500 |
1000 |

1. Calculate the income elasticity of demand when income rises from AED 60,000 to AED90,000 at a price of AED 75. (1 Mark)

2. Due to COVID 19, the average price of a Jones the Grocer meal fell from AED100 to

AED 80. As a result, Slim’s quantity demanded for Jones the Grocer meals increased from 2 to 3 times per week. What would be the implied price demand elasticity? (1 Mark)

3.Last week, sellers of good B took in AED500 in total revenue on sales of 200 units of good B. This week they raised the price of B price and took in AED800 in total revenue on sales of 200 units. At the same time, the price of good A stayed the same, but sales of good A increased from 1000 units to 1600 units. Compute the cross-price elasticity between A and B. (1 Mark)

Answer #1

1) Using the midpoint method, the price elasticity of demand is
determined to be about 0.85. If there is a 10% decrease in the
quantity demanded of the product then what effect would this have
on the price of the product?
A decrease in the price of the product from $8.50 to $10
A 11.8% increase in the price of the product
An increase in the price of the product from $8.50 to $10
2)The ________ is negative for complementary...

Determine the price elasticity of demand, the cross-price
elasticity of demand or the income elasticity in the following
scenarios.
a. Consider the market for coffee. Suppose the price rises from
$4 to $6 and quantity demanded falls from 120 to 80. What is price
elasticity of demand? Is coffee elastic or inelastic?
b. John’s income rises from $20,000 to $22,000 and the quantity
of hamburger he buys each week falls from 2 pounds to 1 pound. What
is his income...

Calculate the elasticity for the following questions
(USING THE MIDPOINT (AVERAGE) FORMULA) and indicate if the goods
are:
1. Inferior,
2. Normal,
3. Complements, or
4. Substitutes
(Please Include The Negative signs in your answers where
appropriate and calculate to 2 decimals)
A. The price of gasoline increases from 16 per
barrel to 28 per barrel and as a result, the demand per month for
new cars changes from 700 to 150.
Part 1: The elasticity is
Part 2: These...

Part 2:
For each of the following,
(a) calculate the elasticity,
(b) interpret your result (in terms of whether a good is
elastic/inelastic, and what the percentage change in quantity will
be in response to a 1% change in price), and
(c) indicate what would happen to revenues for this good if the
price was increased
In response to a 10% increase in price, the quantity demanded
of Bubly decreased by 20%
In response to a 5% decrease in price,...

QUESTION 36 The price elasticity of demand for Alpha personal
computer is estimated to be -2.0. If the price of the computers
decreases by 5%, what would be the expected percentage changes in
the quantity demanded and in the total revenue for the company? a)
Quantity demanded would decrease by 10% and total revenue would
decreases by 5%. b) Quantity demanded would increase by 10% and
total revenue would increases by 5%. c) Quantity demanded would
decrease by 10% and...

Calculate the elasticity for the following questions (USING THE
MIDPOINT (AVERAGE) FORMULA) and indicate if the goods are: 1.
Inferior, 2. Normal, 3. Complements, or 4. Substitutes (Please
Include The Negative signs in your answers where appropriate and
calculate to 2 decimals)
A. The price of gasoline increases from 24 per barrel to 40 per
barrel and as a result, the demand per month for new cars changes
from 550 to 100.
Part 1: The elasticity is Part 2: These...

The price of a good increases from $75 to $100. Sales decrease
from 1000 to 800.
a. Find price elasticity of ticket demand at these prices and
quantities.
b. with the same elasticity calculated above, if price decreases
from $75 to $50, what would be the new quantity demanded?

After 30 years working for a company, Sally finally gets
promoted and her salary has increased from $1000 per week to $1500
per week. What is Sally’s elasticity of demand for goods below?
State, if it is a normal or inferior good.
a) Peaches: Quantity demanded before raise=4 per week, after
raise=9 per week
b) Orange juice: Quantity demanded before raise= 0.75 gallons
per week, Quantity after raise= 1 gallon per week.
c) Shellfish: Quantity demanded before increase= 2 per...

Using the information below answer the following questions.
(Use the Midpoint (Arc) method)
If Qd = 750 - 30 P and Qs = 0 + 40 P
Where: Qd = Quantity of the good demanded Qs = Quantity of the
good supplied (Note: Be sure to include the negative sign in your
answer if appropriate)
Part 1: The Equilibrium Price is:
Part 2: The Equilibrium Quantity is:
Part 3: Price elasticity of demand between P1= 12.21 and P2=
9.21 is:...

A measure of the rate of percentage change of quantity demanded
with respect to price, holding all other determinants of demand
constant is
a.
Income elasticity of demand
b.
Own price elasticity of demand
c.
Price elasticity of market equilibrium
d.
Cross price elasticity of demand
The value of the income elasticity of demand coefficient for
Good X is given as 0.1. This means that
a.
as income increases by 10 percent, quantity demanded rises by 1
percent.
b.
as income...

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