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EC201: Spring 2010
Professor Steven Haider
Problem Sets for Chaps 6  10
NOTE: An answer key follows each of the chapters.
In the answer key, each question is
assigned a “Topic”, which generally refers to a subtitle of the text. Thus, if you would like
additional information about any of the questions, these topics will point you to where to look in
the text.
Version: 16Feb10
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View Full Document Chapter 6
1. The Cozy Chair Company believes it can sell 200 chairs at $200 per chair, or 300 chairs
at $150 per chair. Using the midpoint formula, you can calculate that the price elasticity
of demand (to the nearest tenth) for Cozy Chairs is:
A) 2.5.
B) 1.4.
C) 0.7.
D) 0.5.
Hint: Recall that the formula you should use for PED when given specific points is
2
/
)
(
)
(
2
/
)
(
)
(
/
)
(
/
)
(
PED
2
1
1
2
2
1
1
2
1
2
1
2
P
P
P
P
Q
Q
Q
Q
P
Average
P
P
Q
Average
Q
Q
D
D
D
D
D
D
D
Notice we have all of the pieces that we need:
initial price=200, final price=150, initial
quantity= 200, final quantity=300.
Many students make mistakes when trying to plug everything
into their calculator at one time so be careful or do it piece by piece.
Remember, for PED, we
drop the negative sign (take the absolute value).
Use the following to answer questions 23:
Figure: Demand for Shirts
Page 1
Chapter 6
2. (Figure: Demand for Shirts) The price elasticity of demand for the segment
AB,
using
the midpoint method, is:
A) 13.
B) 11.
C) 0.91.
D) 0.1.
Hint: For the segment AB, initial price=$60, final price=$50, initial quantity=0, final
quantity=100.
3. (Figure: Demand for Shirts) The price elasticity of demand for the segment
EF,
using
the midpoint method, is:
A) 1.3.
B) 1.
C) 0.7.
D) 0.33.
4. The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The
price elasticity of demand is equal to ________ and demand is described as ________.
A) 0.2; inelastic
B) 5; inelastic
C) 0.2; elastic
D) 5; elastic
Use the following to answer questions 56:
Scenario: Price Elasticity
When calculating price elasticity with the following data, please use the midpoint method and
take the absolute value.
Page 2
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5. (Scenario: Price Elasticity) What is the price elasticity of demand between $2.25 and
$2.00?
A) 4.00
B) 5.67
C) 9.00
D) 17.6
6. (Scenario: Price Elasticity) What is the price elasticity of demand between $1.75 and
$1.50?
A) 0.42
B) 1.5
C) 1.86
D) 0.08
Use the following to answer question 7:
Figure: Demand for Shirts
7. (Figure: Demand for Shirts) Using the midpoint method, the absolute value of the price
elasticity of demand for the segment
AB
is:
A) less than the price elasticity of demand for segment
BC
.
B) is less than the price elasticity of demand for segment
EF
.
C) is zero.
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This note was uploaded on 05/18/2010 for the course ECONOMIC Ec 201 taught by Professor Haider during the Spring '10 term at MSU  Iligan Inst of Tech.
 Spring '10
 haider

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