Question

Question 3

Assume the following demand curve: Q = 100,800 – 3,904(P). Calculate elasticity for a price change from $17.10 to $18.70. Report your answer as a POSITIVE number, rounded to one decimal place.

**Question 4**

Assume the following demand curve: Q = 1,400 – 135(P). Variable costs = $3.50. Calculate the optimal price. Round to two decimal places.

Answer #1

3. Elasticity for a price = %change in quantity / %change in price

P1 = 17.10

Q1 = 100800 - 3904(P1) = 34041.6

P2 = 18.70

Q2 = 100800 - 3904(P2) = 27795.2

% change in quantity = (Q1-Q2) / (avg of Q) = (34041.6-27795.2) / [(34041.6+27795.2)/2] = 6246.4/30918.4 = 0.2020

% change in price= (P1-P2) / (avg of P) = (17.10-18.70)/[(17.10+18.70)/2] = -1.6/17.9 = -0.089

Elasticity for price = 0.2020/(-0.089) = -2.269 To answer this = 2.3 after rounding off and absolute.

4. Using concept of Marginal revenue = Marginal cost

and marginal revenue is derivative of total revenue

total revenue = price * quantity

Optimal price = 6.93

refer image

The equation for a demand curve is P=2/Q. What is the elasticity
of demand as price falls from 5 to 4? What is the elasticity of
demand as the prices falls from 9 to 8? Would you expect the
answers to be the same? Why/why not?

For the demand curve Q=50−P, what is the own-price elasticity of
demand when P=16 2/3 (that is, 50/3)? Is demand elastic, inelastic,
or unit elastic at that point?
a) -0.5, inelastic
b) -1, unit elastic
c) -0.5, elastic
d) 33.3, inelastic
e) 33.3, elastic

Q#3: Externalities
The Demand curve for parking lots is given by P=1000-Q.The supply
of parking spots in a city is associated with increasing external
costs. While the private supply curve is given by P=Q (where P
denotes price and Q quantity), the social supply curve is P=2Q. Now
assume the city imposes a Pigou Tax on the supply. Calculate the
remaining deadweight loss. Rounded up or down to the next closest
integer. (2 pts)

DD: p=1600-0.04Q^2
a) calculate the arc elasticity of demand between Q=50 and
60
b) calculate the point elasticity of demand at Q=55
c) are the two estimates same? Very close? Why or why not?
d) if price rises by 3%, calculate the corresponding percentage
change in quantity demanded

how
do you draw the demand curve q=250-10p
calculate the price elasticity of demand at prices of $5, $10, and
$15 to show how it changes as you move along this linear demand
curve

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The following is the MOST PRECISE definition of
the Own Price Elasticity of Demand:
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A. Is the measure of how sensitive is the consumer to change in
prices.
B. It measures the slope of the demand curve.
C It measures the percentage change in quantity demanded of good
x as a result of a percentage change in price per unit of good
x.
D. It measures the total change in quantity demanded of good x...

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price is 3. How does price regulation affect the quantity sold

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a.) Construct a
four-column table of P and Q with P ranging from 20 to
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b.) Graph D and MR. (Plot
points—with $ on the vertical axis and Q on the horizontal
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c.) Why is P > MR
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. If the equation for a demand curve is
P=45-3Q. What is the elasticity in moving from a quantity of 5 to a
quantity of 6?
4. The equation for a demand curve is P=4/Q.
What is the elasticity of demand as price falls from 5 to 4?
5. The equation for a supply curve is 2P=Q.
What is the elasticity of supply as price rises from 3 to 4?
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