Unformatted text preview: might be two eﬀects]. Elasticities Exercise 3 (Computing Point Elasticities) Compute the priceelasticities of the following demand functions: a) Q d ( p ) = 32 p , b) Q d ( p ) = abp , a,b > . c) Q d ( p ) = 10 p3 , d) Q d ( p ) = Apε , A, ε > . (Demand functions of this type are known as isoelastic functions. Can you ﬁgure 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 ﬁts the data is Q d ( p ) = 12020 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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 Fall '08
 Woroch
 Microeconomics, Supply And Demand, Qd, demand function, demand functions

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