quiz

(TCO A) A market is in equilibrium with equilibrium Quantity of MEQ and equilibrium Price of MEP.

(2 pts.) a. What happens to Market Equilibrium Quantity (MEQ) if there is an increase in Demand?

(4 pts.) b. What happens to Market Equilibrium Price (MEP) if Supply decreases as Demand increases?

(4 pts.) c. What happens to Market Equilibrium Quantity (MEQ) after there has been an increase in Supply followed by a decrease in Demand which is followed by another increase in Supply?

The following table shows part of the demand function for tickets to an outdoor summer concert by a popular singing group:

Price (P)...Quantity (Q) 
50........... 100
35..........  180
20............300
10............500 

a.      (2 pts.) What is demand elasticity in the $35 - $50 price range?  Is demand elastic, inelastic, or of unitary elasticity?  Calculate the value and show all of your work.  Be sure to use the midpoint equation to determine elasticity. 

b.    (4 pts.) Assume demand elasticity is 1.0 in the $20 - $35 price range. In this range of demand, by what percentage would quantity demanded change if price decreases by 5 percent?  Show your detailed calculations

c.     (4 pts.) What is the effect of a price increase from $10 to $20 on total revenue for the event?   Does total revenue (TR) increase, decrease, or remain the same?  By how much?  Show your detailed calculations.

(Points : 10)