Chapter 1 - McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials Chapter 1 Introduction 1 McGill Faculty of Engineering MIME 310

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
1 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials Chapter 1. Introduction
Background image of page 1

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

View Full DocumentRight Arrow Icon
2 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials 1.1 Consider the demand schedule shown to the right. Tangent Q i t t Price Quantity Demand 0 Graphical Method Must be origin Plot the demand curve and approx- imate the point elasticity at various points using the graphical method. Compare these results with the arc elasticities determined between adjacent points. E D = ( Q i - Q t ) Q t P t P t = ( Q i - Q t ) P t P t Q t = ( Q i - Q t ) / Q t P Q Point Price ($/unit) Quantity demanded (units/period) A 7 450 B 6 750 C 5 1250 D 4 2000 E 3 3250 F 2 4750 G 1 8000
Background image of page 2
3 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials 0 1 2 3 4 5 6 7 0 1000 2000 3000 4000 5000 6000 7000 8000 QUANTITY (units/period) PRICE ($/unit) 4400 6100 7400 To verify, AE CD = -( (2000 - 1250) / (2000 + 1250) ) / ( (4 - 5) / (4 + 5) ) = 2.08 Likewise, AE DE = 1.67 and AE CE = 1.78 C D E At E: (7400 - 3250) / 3250 = 1.28 At C: (4400 - 1250) / 1250 = 2.52 At D: (6100 - 2000) / 2000 = 2.05
Background image of page 3

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

View Full DocumentRight Arrow Icon
McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials 1.2 Consider the demand function [ Q = C / P x ] in which C and x are constants. How does the elasticity vary along this demand function (hyperbola)? E D = -(dQ/dP) / (Q / P) dQ/dP = -x•C / P x+1 E D = -(-x•C / P x+1 ) (P / Q) = (x•C / P x+1 ) (P•P x / C) = x \ Elasticity is constant and equal to x. Note:
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/06/2009 for the course MIME 310 taught by Professor Bilido during the Summer '08 term at McGill.

Page1 / 14

Chapter 1 - McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials Chapter 1 Introduction 1 McGill Faculty of Engineering MIME 310

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online