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LectureAssignment03

# LectureAssignment03 - 1 ECONOMICS 100 Lecture...

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Lecture Assignment #3 (Elasticity) Source: LR 11 and LR10, Chapter 4, including the Appendix. 1. Elasticity 1.1 What is the general definition of the elasticity of variable V with respect to variable W? 1.2 What does an elasticity value of greater than 1 or less than 1 (in absolute value) signify? 1.3 Apply the general statements above to the price elasticity of demand. 2. Arc Elasticity of Demand and Total Revenue 2.1 Use the mid-point formula to compute the price elasticity of demand between point A and point B on a demand schedule, in each of the three following cases. (This is called the arc elasticity between two points). Compute also Total Revenue , sometimes called Total Expenditure , (price times quantity) at A and at B in each case, and relate this to the value of the price elasticity. A B p q p q (i) 10 10 5 20 (ii) 10 10 5 25 (iii) 10 10 5 15 The Mid-point formula is often written as follows: E D = - [change in q / average q] / [change in p / average p] = - [ q / avg. q] / [ p / avg. p] Note: 1

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LectureAssignment03 - 1 ECONOMICS 100 Lecture...

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