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# pg 142 - Managerial Economics(MG608 Assignment#3 Victor...

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Managerial Economics (MG608) Assignment #3 Victor Smith Date: 02/16/2003 Textbook Problems p142 #1) p 142 #3) Demand Equation Q = 100 - 10P + 0.5Y 3a) Interpret equation where P = 7, Y = 50 then Q = 55 3b) price point elasticity 3c) income point elasticity where Y (income) = 50 3d) price elscticity when Y(income) = 70, P = 8 then Q = 55 point elasticity p142 #5) P = \$70, Q = 4,000, Ep = -2.5 elastic, normal good: reduce price, quantity & revenue increase when price reduced P2 = \$63 (10% decrease, -0.1) p143 #9) Demand Equation Q = 1500 - 200P Q = 1500 - 200P Elasticity P = 7.5 - (1/200)Q Price (P) Quantity (Q) Point Arc Total Rev. (TR) Marg.Rev. (MR) 7.00 100 -14.000 -9.000 700 6.500 MR = dTR/dQ = 7.5 - (1/100)Q 6.50 200 -6.500 -5.000 1300 5.500 6.00 300 -4.000 -3.286 1800 4.500 5.50 400 -2.750 -2.333 2200 3.500 5.00 500 -2.000 -1.727 2500 2.500 4.50 600 -1.500 -1.308 2700 1.500 4.00 700 -1.143 -1.000 2800 0.500 3.50 800 -0.875 -0.765 2800 -0.500 3.00 900 -0.667 -0.579 2700 -1.500 2.50 1000 -0.500 1.000 2500 -2.500 p143 #13) Vanilla Ice cream sales increase 20%, 0.20 Chocolate Syrup sales increease 10%, 0.10 13a) Elasticity o Vanilla ice cream 13b) Chocolate Syrup is a complementary product to Vanilla Syrup 13c) The price change was beneficial for the supermarket. The demand curve is elastic.

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