microeconomics & mathematics
d9f2v6d7v1
sample_2_answer.docx1) Prove the following relationship between change in price and change in specific tax rates:
Answer: See the appendix to the chapter.
2) When the price of broadband access capacity increases by 10%, commercial customers buy about 3.8% less capacity. What is the elasticity of demand for broadband access? Is demand at the current price elastic or inelastic?
Answer:
elasticity is percent change is quantity over percent change in price. this the elasticity for broadband is 3.8/10 = 0.38.
0.38 is less than 1, thus the demand for broadband is inelastic.
3) Would you prefer for a 15 cent per gallon tax on milk to be collected from milk producers or from consumers at the store? Why?
Answer: It doesnt matter. The outcome is the same
4) Use calculus to prove that the elasticity of demand is a constant everywhere along the demand curve whose demand function is given by:
Answer:
5) The supply curve is Q = g + hp. Derive a formula for the elasticity of supply in terms of p (and not Q). Now give one entirely in terms of Q.
6) Use math to show that, as the supply curve at the equilibrium becomes nearly perfectly elastic, the entire incidence of a specific tax will fall on consumers.
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