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ECO 102 Microeconomics Questions Assignment

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Question;1. Use the graph;below to answer the following questions.;(26 points);What is the absolute value;of the price elasticity of demand between P=100 and P=80? (5 points);Based on the value you;calculated, is demand elastic, inelastic, or unit elastic? (4 points);What does the value you;calculated imply about the relationship between price and quantity;demanded? (4 points);What is the absolute value;of the price elasticity of demand between P=40 and P=20? (5 points);Based on the value you;calculated, is demand elastic, inelastic, or unit elastic? (4 points);What does the value you;calculated imply about the relationship between price and quantity;demanded? (4 points);2. Use the graph below to answer the following;questions. (36 points ? each part is worth 4 points);Elasticity values are;greater than 1 in absolute value in the portion of the graph described by;letter _____.;Elasticity values are less;than 1 in absolute value in the portion of the graph described by letter;Elasticity values are;exactly equal to 1 in absolute value in the portion of the graph described;by letter _____.;The inelastic portion of;the graph is the area described by letter _____.;The elastic portion of the;graph is the area described by letter _____.;The unit elastic portion;of the graph is the area described by letter _____.;Total revenue is maximized;over the portion of the graph described by letter _____.;Total revenue is;increasing when price increases over the portion of the graph described by;letter _____.;Total revenue is;decreasing when price increases over the portion of the graph described by;letter ______.;3. Suppose the demand;for guitars in State College is given by Qd = 8,000 ? 10P where Qd is the;quantity demanded, and P is the price of guitars. Also, suppose the supply of guitars is given;by Qs = 30P ? 2000, where Qs is the quantity supplied of guitars. (38 points);a) Calculate the equilibrium price of guitars and the;equilibrium quantity of guitars in State College. Show your work. (10 points);b) Suppose the actual price of guitars is $500. Determine if there is a shortage, a surplus;or if the market is in equilibrium at a price of $500. If there is a shortage or surplus, calculate;how much the shortage or surplus is. (8 points);c) Given your answer;to b), is the price of guitars likely to rise, fall, or stay the same? (4;points);d)Suppose guitars;and guitar strings are complements. Draw;a graph indicating what will happen in the market for guitar strings if the price;of guitars decreases. Be sure to label;your graph carefully, putting Price on the vertical axis and Quantity on the;horizontal axis. You do not need to have;actual numbers on this graph, but you should clearly indicate how the decrease;in the price of guitars will affect the market for guitar strings, and what;will happen to the equilibrium price and quantity of guitar strings. (16;points)

 

Paper#57142 | Written in 18-Jul-2015

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