2 - might be prevented from charging this price if they are...

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Wendy Min 09.23.2007 Econ Problem Set 2: 1. a) 0 20 40 60 80 100 120 0 5 10 15 quantity demanded quantity supplied Linear (quantity demanded) Linear (quantity supplied) The equilibrium price is $6 for the supply of 40. b) 0 20 40 60 80 100 120 140 0 5 10 15 quantity demanded quantity supplied Linear (quantity demanded) Linear (quantity supplied) The new equilibrium is $8 for the supply of 60. 2. a) 0 2 4 6 8 10 12 14 0 20 40 60 s d s2 Linear (s) Linear (d) Linear
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b) 0 2 4 6 8 10 12 14 0 20 40 60 s d d2 XY (Scatter) 4 Linear (s) Linear (d) c) 0 2 4 6 8 10 12 14 0 20 40 60 s d s2 Linear (s) Linear (d) Linear d) 0 2 4 6 8 10 12 14 16 0 20 40 60 s d d2 Linear (s) Linear (d) Linear e) 0 2 4 6 8 10 12 14 0 20 40 60 s d s2 Linear (s) Linear (d) Linear
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f) 0 2 4 6 8 10 12 14 0 20 40 60 s d d2 Linear (s) Linear (d) Linear 3. a) b) i. ((110-90)/100)/ ((7-6)/6.5) = 1.3 ii. ((130-110)/120) / ((6-5)/5.5) = 0.9167 iii. ((150-130)/140) / ((5-4)/4.5) = 0.6429 c) Yes, as price decrease, numbers increase, displaying inelastic properties. Therefore, the total expenditure decreases as well. d) The total expenditure is at a maximum when the price is $6. Video stores
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Unformatted text preview: might be prevented from charging this price if they are heavily competed or video retail prices lower. e) ((220-180)/200) / ((7-6)/6.5) = 1.3 The elasticity is the same as before. This is because the price change remains the same and the change in quantity is of same proportion. Therefore, the proportion of change in quantity demanded to change in price remains the same. f) ((210-190)/200) / ((7-6)/6.5) = 0.65 The elasticity of demand for the price change of $7 to $6 is now less than before. This is due to the fact that the quantity demanded has increase as before, but in a significantly smaller interval. Price Quantity Total Expenditure $7 90 $630 $6 110 $660 $5 130 $650 $4 150 $600 $3 170 $510...
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This note was uploaded on 04/13/2008 for the course ECON 132 taught by Professor Rado during the Spring '08 term at BC.

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2 - might be prevented from charging this price if they are...

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