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Calculate the elasticity of short-run demand

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Reference no: EM133271948

Question 1. a) The initial price of a chip is $410 and at this price the number of chips sold per ear equal 36 million. However, when the price of a chip falls to $390 the quantity demanded to 44 million chips a year. Using this information calculate the price of elasticity of demand.

b) If the price falls from $500 a chip to $300 a chip and the quantity demanded rises from 0 to 80 million chips per year respectively, what is the price elasticity of demand.

Question 2 You have been hired as an economic consultant by Intel and given the following world demand schedule for intel chips: use mid point formula to solve

Price (dollars per chip)
 
Quantity Demanded (millions of chips per year)
 
100
 
60
 
200
 
50
 
300
 
40
 
400
 
30
 
500
 
20

Your advice is needed for, the following questions:

(Change in Q / sum of q1+q2/ 2) divided by (change in p / sum of p1 +p2 /2) mid point formula

10 / (60+50/2) divided by (100 / (100+200/2) = - 0.28 100 -200 6000
- 0.56 10 000
- 1 12000
- 1.8 12000
10000

a) What will happen to Intel's total revenue if the price of a chip falls from $400 to S300? Revenue stays the same
b) What will happen to Intel's total revenue if the price of a chip falls from $300 toS200?
c). What is the price at which Intel's total revenue is maximized?
d) At an average price of $350, is the hand for chips elastic or inelastic? Use the total revenue test and your answer to part a) to answer this question.
e) At an averageprice of $250, is the demand for chips elastic or inelastic? use the total revenue test and your answer to part b) to answer this question.
f) What is the elasticity of demand for chips at the price that maximizes Intel's revenue?

Question 3. The following table gives some data on the demand for long-distance telephone calls:

Price (cents/minute)
 
Qd in the Long-Run Qd in the Short-Run(millions of minutes/day)
 
(millions of minutes/day)  
10
 
700
 
1000
 
20
 
500
 
500
 
30
 
300
 
0

At a price of 20 cents a minute.

a) Calculate the elasticity of short-run demand.

b) Calculate the elasticity of long-run demand.

c) Is the demand more elastic in the short-run or the long-run?

Question 4. State the sign (positive "+" or "-" negative) of the following elasticities:

a) The cross elasticity of demand for ice cream with respect to the price of frozen yogurt.

b) The cross elasticity of demand for corn ready to be popped with respect to the price of popcorn machines.

c) The income elasticity of demand for Caribbean cruises.

d) The income elasticity of demand for toothpaste.

Question 5 Draw the following demand curies:

a) Perfectly Inelastic

b) Unit Elastic

c) Perfectly Elastic

Reference no: EM133271948

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