{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

PS 3 Solutions

# PS 3 Solutions - Economics I Professor Gunter TA Chris...

This preview shows pages 1–2. Sign up to view the full content.

Economics I Professor Gunter TA: Chris Zwicker Problem Set #3: Elasticity Your Aunt Mildred LOVES to read trashy novels at the beach during her summer vacation. Here is a graph of her demand: Now Milly used to buy her trashy novels from a used book store on Packer Ave, which closed two weeks ago. Now Milly is forced to fill her consumption needs by visiting the overpriced bookstore at Lehigh University. The used bookstore charged \$1.00 for this drivel, and the University store charges \$5.00 for the same books. 1. How many books did Milly used to buy from the used book store? When Price = \$1, Q = 15 books 2. How will the closure of the used bookstore affect her consumption (what is new Q)? When Price = \$5, Q = 3 books 3. What is the percent change in price? In quantity? % ∆ Price = (P 2 – P 1 ) / P 1 = (5-1)/1 = 500% % ∆ Quantity = (Q 2 -Q 1 )/Q 1 = (3 – 15)/ 15 = - 80% - Using the Midpoint Formula, these numbers are irrelevant in elasticity calculation. 4. What is the elasticity that represents this change in price(use the midpoint method to solve)?

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 2

PS 3 Solutions - Economics I Professor Gunter TA Chris...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online