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Unformatted text preview: might be two eects]. Elasticities Exercise 3 (Computing Point Elasticities) Compute the price-elasticities of the following demand functions: a) Q d ( p ) = 3-2 p , b) Q d ( p ) = a-bp , a,b > . c) Q d ( p ) = 10 p-3 , d) Q d ( p ) = Ap- , A, > . (Demand functions of this type are known as iso-elastic functions. Can you gure out why?) Exercise 4 (Computing Arc Elasticities) Consider the following table that gives some observations for a demand function: Price 1 2 3 4 5 6 Quantity 120 100 80 60 40 20 1) Plot this demand function using only these date. 2) Compute the arc price elasticities at each point using the midpoint formula. 3) A demand function that ts the data is Q d ( p ) = 120-20 p . Compute the point price elasticities at each value of p in the table and compare them to the empirical ones. Discuss the results. 1...
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This note was uploaded on 07/09/2010 for the course ECON 100A taught by Professor Woroch during the Fall '08 term at University of California, Berkeley.
- Fall '08