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Chapter 5 Practice Problems

# Chapter 5 Practice Problems - beef Good Price in beef =...

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Price Price Quantity Quantity % P = -.50(3.00 – 3.50)/(3.25) -1.30 =% Q/(-.1538) % Q = .1999 Revenue before = 1,500 x \$3.50 = \$5,250 Revenue after = (1,500 x 1.1999) x \$3.00 = 1,800 x \$3.00 = \$5,400 Change in revenue = \$5,400 - \$5,250 = \$150 -.3664 = % Q/% Income -.3664 = % Q/10.0 % Q = -.3664 x 10.0 % Q = -3.664 .2927 = % Q chicken /% P beef % Q chicken = .2929 x 10. % Q chicken = 2.929 .0572 = % Q beef /% P chicken % Q beef = .0572 x 10. % Q beef = 0.572 Price Quantity Practice Problems for Chapter 5 AGEC 105 Good Price Quantity Demanded Haircuts per Week \$20 \$16 40 60 Manicures per Week \$12 \$8 80 120 Use the above table to answer the next three questions. Suppose that the current price for a haircut is \$20 and the current price for a manicure is \$12, and Earl has a sale of \$4 off the price of either a haircut or a manicure. 1. The above table shows the prices of two services offered by Earl’s Barber Shop and the resulting quantities demanded by customers. The price elasticity of demand for manicures (using Arc elasticity approach) is a. -1 b. -2 c. -3 d. -0.5 e. -0.4 2. The above table shows the prices of two services offered by Earl’s Barber Shop and the resulting quantities demanded by customers. The price elasticity of demand for haircuts (using Arc elasticity approach) is a. -1 b. -1.8 c. -3.5 d. -2.25 e. -0.5 3. In the example a. Haircuts have the smaller absolute change in quantity demanded and the more elastic demand b. Earl can earn more revenue from manicures at the lower price

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Chapter 5 Practice Problems - beef Good Price in beef =...

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