Problems using point elasticity, Microeconomics

Assignment Help:

Problems Using Point Elasticity

- We may need to compute price elasticity over portion of demand curve instead of at a single point.

- The price and quantity used as base will alter price elasticity of demand.

Point Elasticity of Demand: An Example

-Assume that

Price rises from 8$ to $10 quantity demanded falls from 6 to 4
The percent change in price equals: $2/$8 = 25% or $2/$10 = 20%
The percent change in quantity equals: -2/6 = -33.33% or -2/4 = -50%

Elasticity equals:

-33.33/.25 = -1.33 or -.50/.20 = -2.54

-Which one is correct out of these?

Related Discussions:- Problems using point elasticity

Explain production and costs, The reason that an entrepreneur supposes the ...

The reason that an entrepreneur supposes the risk of starting a business is to earn profits. The fundamental assumption in the theory of production is that a rational owner of a b

Estimation based on the probit model, Let {(y i ; x i ); 1 ≤ i ≤ n} be an i...

Let {(y i ; x i ); 1 ≤ i ≤ n} be an i.i.d sequence of random variables where yi and xi satisfy the linear relationship y i = β 0 + β 1 x i + ∈ i with Cov(x i ; ∈ i ) = 0

Illustration of externalities, Externalities: Many economic activities have...

Externalities: Many economic activities have collateral effects (at times positive, but more often negative) on other people who aren't directly involved in that activity. Illustra

Problem, For each of the following scenarios, you use a SS & DD diagram to ...

For each of the following scenarios, you use a SS & DD diagram to demonstrate the effect of a given shock on equilibrium price and quantity in specified competitive market. Explain

POLICY FAILURE, GROWTH OF EMPLOYMENT OPPORTUNITIES: Policy failure ref...

GROWTH OF EMPLOYMENT OPPORTUNITIES: Policy failure refers to situations: i) When the objectives of public policy are attained partially or inadequately or in a distorted

Elasticity, Type of total outlay

Type of total outlay

What do you meant by financialization, Q. What do you meant by Financializa...

Q. What do you meant by Financialization? Financialization: The trend under neoliberalism through that real production in the economy is accompanied by an increasing degree of

Explain the concept of opportunity cost, The concept of opportunity cost oc...

The concept of opportunity cost occupies a very important place in modern economic analysis. The opportunity cost of any good is the next best alternative goods that are sacrificed

Consumer equilibrium.., assignment on consumer equilibrium

assignment on consumer equilibrium

What are expansionary and contractionary effects, What are expansionary and...

What are expansionary and contractionary effects? Expansionary effect refers to the effect of raising the equilibrium level of national income. For example, an increase in gov

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages