| ECONOMICS |
| PRICE ELASTICITY |
| | 1 | Suppose that the total revenue and total cost functions of a firm are: |
| | | TR=45*Q-0.5Q^2 |
| | | TC=Q^3-8Q^2+57Q+2 |
| | | a. Build the profit function. |
| | | b. Graph the profit function. |
| | 2 | Given the following linear supply and demand equations, find the equilibrium price and quantity for the supply-demand model. |
| | | P=-14Q-42 |
| | | P=12Q+90 |
| | 3 | Use the following coordinates to answer the following questions. |
| | | (2400, $0), (1800, $3), (1000, $7), and (0, $12) |
| | | a. Find the arc price elasticity of demand over the price range from $3 to $7. Interpret the value of price elasticity. |
| | | b. Calculate the arc price elasticity over the price range from $0 to $12. Interpret the PED. |
| | 4 | Suppose a firm sells 90 units when the price is $8, but sells 110 units when the price falls to $6. |
| | | a. Calculate the firm’s revenue at each of these prices. |
| | | b. Use the TR test to determine is demand is elastic, inelastic or unitary elastic over this range. |
| | | c. Calculate the elasticity of demand using the arc interval formula. |
| | 5 | Suppose a firm sells 20,000 units at a price of $10, but sells 40,000 units at a price of $8. |
| | | a. Calculate the price elasticity of demand over these prices using the arc interval formula. |
| | | b. Determine if the price elasticity if demand is elastic, inelastic or unitary. |
| | | c. If prices were to fall another 4% what would be expected to happen to total revenue? |
| | 6 | In what range is the price most inelastic? |
| | 7 | If a business increased the price of its product from $7 to $8 when the price elasticity of demand was inelastic, then |
| | | what happens to TR, total revenue? |
| | 8 | You are the sales manager for a pizza company and have been informed that the price elasticity of demand for your most popular pizza is greater than 1. |
| | | To increase total revenues, you should do what? |
| | 9 |
| | | In the above diagram, what type of price elasticity does: |
| | | a. D1 have? |
| | | b. D2 have? |
| | 10 | If, when the price of a product rises from $1.50 to $2, the quantity demanded of the product decreases from 1,000 to 900, |
| | | a) Find the value of the price elasticity of demand. |
| | | b) Graph this demand curve using a scatter plot. |
| | | c) What is the slope of the demand curve? |
abdussamet akca
ECOPriceElasticity10Q2020.xlsx
