lab3 - October 4-8, 2010 Economics 203: Intermediate...

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October 4-8, 2010 Economics 203: Intermediate Microeconomics I Lab Exercise #3 Section 1:Test Your Understanding True or False? 1) Demand is likely to be more sensitive to price over a short period than a long period. 2) If the demand for a commodity is price elastic, an increase in its price will lead to an increase in the total amount spent by consumer on the commodity. 3) The demand for salt and pepper is likely to be price elastic. Section 2: discussion Suppose that each of the four corners of an intersection contains a gas station, and that the gasoline is essentially the same. Do you think that the price elasticity of demand for each station’s gasoline is above or below 1? Why? Section 3: Applications: 1) The price elasticity of demand for a particular kind of screwdriver is 2, and the marginal revenue is $2. What is the price of this screwdriver? 2) The Drink-It Distributors concludes that the demand function for its product is: Q=95-73P+82P R + 0.25 M where Q is the quantity demanded of its product, P is the price of its product, P
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This note was uploaded on 08/03/2011 for the course ECON 203 taught by Professor Okhan during the Spring '11 term at University of Victoria.

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lab3 - October 4-8, 2010 Economics 203: Intermediate...

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