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Unformatted text preview: Economic Sciences 101 Section 02 Spring Semester 2011 Homework 4 Due April 21 @ 1:25 PM Name: Michael Reber 1. Fun with price elasticity. a)The market demand curve shows that when the price is $12, quantity demanded is 20 units and when the price is $6, the quantity demanded is 30 units. What is the price elasticity (of demand) for these points? b) Suppose a firm is in a perfectly competitive market. It sells 5 units when the price is $10.Suppose that the competitive price increases, but that total revenue decreases. Is the demand curve facing this firm elastic or inelastic? b.i)It would be elastic because Total revenue decreases c)A new technology in the production of milk shifts the supply curve out and causes the competitive price to decrease by 10%. As a result, total revenue received by milk producing firms decreases by 3%. What is the percent change in the CE quantity? d) Suppose the price elasticity (of demand) for good X is -2. If price decreases by 1%, how much does the quantity demanded change (in percent)? If price decreases by 5%, how much does the quantity...
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This note was uploaded on 01/30/2012 for the course ECONS 101 taught by Professor Michalski during the Spring '08 term at Washington State University .
- Spring '08