handout-2ans

# Handout-2ans - 1 Handout 2 Market Analysis(Answer Key The table below gives the individual demands of Lisa and Chuck for movies Price movie \$7 6 5

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1 Handout 2 : Market Analysis (Answer Key) The table below gives the individual demands’ of Lisa and Chuck for movies: Quantity of movies demanded / mo. Price / movie Lisa Chuck \$7 1 0 6 2 0 5 3 0 4 4 1 3 5 2 2 6 3 a) Calculate the market demand for movies assuming that only Lisa and Chuck have individual demands for movies. Explain this market demand. Sum of individual demand curves Ï Price / movie Market Q D \$7 1 6 2 5 3 4 5 3 7 2 9 b) Graph the market demand for movies found in (a). Does this market demand follow the “law of demand.”? Explain and offer reasons for this law. P Yes, it follows “law of demand.” S Inverse relationship between P and Q . 7 Reasons for law: 6 a) Income effect 5 b) Substitution effect 4 c) Diminishing Marginal Utility 3 d) Simple reasoning: 2 D M Buy more at lower prices . 1 0 1 2 3 4 5 6 7 8 9 Q (mov/mo)

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2 c) Calculate the price elasticity of demand for movies given your market demand in (a) for each price change. Is demand elastic, unit elastic, inelastic? Explain in detail.
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## This note was uploaded on 10/26/2009 for the course ECON 180-004-20 taught by Professor Bresnock during the Fall '09 term at UCLA.

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Handout-2ans - 1 Handout 2 Market Analysis(Answer Key The table below gives the individual demands of Lisa and Chuck for movies Price movie \$7 6 5

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