BU224_02_Carr_Marsha_Unit 5 - Unit 5 AB224 | Microeconomics...

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Unit 5 AB224 | Microeconomics Unit 5 Assignment: Elasticity of Demand and Consumer Surplus Name: Marsha Carr Course Number and Section: AB224–02 Date: 11/20/16 General Instructions for all Assignments 1. Unless specified differently by your course instructor, save this assignment template to your computer with the following file naming format: Course number_section number_Last_First_unit number 2. At the top of the template, insert the appropriate information: Your Name, Course Number and Section, and the Date 3. Insert your answers below, or in the appropriate space provided for in the question. Your answers should follow APA format with citations to your sources and, at the bottom of your last page, a list of references. Your answers should also be in Standard English with correct spelling, punctuation, grammar, and style (double spaced, in Times New Roman, 12–point, and black font). Respond to questions in a thorough manner, providing specific examples of concepts, topics, definitions, and other elements asked for in the questions. 4. Upload the completed Assignment to the appropriate Dropbox. 5. Any questions about the Assignment, or format questions, should be directed to your course instructor. Assignment In this Assignment, you will calculate the Price Elasticity of Demand, demonstrate a firm understanding of consumer choices based on differing marginal utilities, consumer surplus, and how the buying choice and amount of consumer surplus changes based on various pricing schemes. In this Assignment, you will be assessed on the following outcome: AB224-5: Demonstrate how the concept of utility affects purchasing decisions by individuals and consumer surplus. Page 1 of 8
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Unit 5 AB224 | Microeconomics Questions 1. The accompanying table shows the price and monthly demand for barrels of gosum berries in Gondwanaland. Price of gosum berries per barrel Native Demand for gosum berries per month $100 0 $90 100 $80 200 $70 300 $60 400 $50 500 $40 600 $30 700 $20 800 $10 900 $0 1000 a. Using the midpoint method (show your work), calculate the price elasticity of demand when the price of barrel of gosum berries rises from $10 to $20. What does this estimate imply about the price elasticity of demand of gosum berries? (800 – 900) ÷ (900 + 800)/2 ÷ (20 – 10) ÷ (10 + 20)/2 -100 ÷ (1700 / 2) ÷ (10 ÷ (30 / 2) (-100 ÷ 850) ÷ (10 ÷ 15) -0.1176 ÷ 0.6667 = 0.1765 Since the price elasticity of demand is less than 1, the price elasticity of demad for the gosum berries is inelastic in this price range. A change in price will cause a smaller change in the amount demanded.
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