Price elasticity, Microeconomics

Assignment Help:

The price elasticity ( ε ) of demand for Q has been estimated at -0.5. Current consumption Q* is 70 units and market price (P*) is 0.70.

a. Fit a linear demand curve to the observed market data. Illustrate your result using a suitably labelled diagram. Hint: ε - = b(P*/Q*)and the equation for a linear demand function is Q* = a-bP*.

b. Now assume that the price of Q increases to P* = 0.80. Using your estimated demand function, calculate the change in consumer surplus arising from the price increase. Illustrate your result.


Related Discussions:- Price elasticity

Subsitution and income effect, subsitution effect dominate tha income effec...

subsitution effect dominate tha income effect in which good case?

Wealth tax, Wealth Tax: A tax in that owners of specific forms of wealth (l...

Wealth Tax: A tax in that owners of specific forms of wealth (likereal estate, financial wealth, or inheritances) should pay a specified proportion of that wealth to government, us

Price Elasticity of supply, Explain the difference between elastic and fixe...

Explain the difference between elastic and fixed supply

Explain advantage and comparative advantage differ, 1. Explain how abs...

1. Explain how absolute advantage and comparative advantage differ? 2. Give an example in which a person has an absolute advantage in doing some thing but another pers

Long run average cost (lac), Long Run Average Cost (or LAC) -Constant R...

Long Run Average Cost (or LAC) -Constant Returns to Scale If the input is doubled, the output will double and average cost is constant at all the levels of output.

Periodic table, Chemical properties of p block elements

Chemical properties of p block elements

Rational decision, what is rational decision and why it requires one''s cho...

what is rational decision and why it requires one''s choices be consistent with one''s goals?

Point elasicity, Q=10-2P,PRICE DECREASE FROM RS 3 TO 2

Q=10-2P,PRICE DECREASE FROM RS 3 TO 2

Visit to village panchayat for agriculture based project., any village panc...

any village panchayat in west bengal and get information for doing a project.

Demand forecasting, What is Demand Forecasting? Explain in brief various me...

What is Demand Forecasting? Explain in brief various methods of forecasting Demand.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd