Reference no: EM132813449
1. The demand is given by PQP QQ(1)
2. The demand is given by PQP Q(2) = 80 - 0.02, where is the price ($/kilo) and is the quantity demanded (kilos/week). Find the point own price elasticity of demand when the quantity traded is = 2,400 kilos/week.
= 80 - 0.02, where is the price ($/kilo) and is the quantity demanded (kilos/week). Find the price at which the point own price elasticity of demand is ε = 1.5.
3. When the price of coffee was raised from $1.20 per cup to $1.25 per cup, the customers reduced their purchases (number of cups bought per month) by 3%. Find the point own price elasticity of demand for coffee.
4. Basil budgets $500 a year for movies. That is he spends $500 a year going to a movie theater no matter what the price of a movie ticket is - if the tickets are more expensive he will buy fewer tickets; if the tickets become cheaper he will buy more; but the total he spends on them is $500 a year. What is Basil's own price elasticity of demand for movie tickets? Give the number and explain.
5. The demand is given by P = 80 - 0.02Q, where P is the price ($/kilo) and Q is the quantity demanded (kilos/week). The supply is given by P = 20 + 0.005Q, where P is the price ($/kilo) and Q is the quantity supplied (kilos/week). If a $5 per unit excise tax is imposed in this market what is the economic incidence of the tax. i.e., what part of the $5 per unit is paid by the sellers and which part is paid by the sellers? Show your work.
6. People can make changes to reduce their quantity demanded for gasoline when the price of gasoline changes. Give 2 examples of such changes that illustrate why the long-run elasticity of demand is greater than the short-run elasticity. Explain.
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