Econ - Darial [email protected] Managerial Economics 12:40...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Darial Sneed @02638624 Managerial Economics 12:40 Class Homework #4 Problems: 4.5, 4.9 4.5 The demand for personal computers can be characterized by the following point elasticity’s: price elasticity = -5, cross-price elasticity with software = 4 and income elasticity = 2.5. Indicate whether each of the following statements is true or false, and explain your answer A. A price reduction for personal computers will increase both the number of units demanded and the total revenue of sellers. Answer : True. To increase units sold there must be a decrease in price, which represents a downward slope. If the price elasticity has a negative sign this is what occurs. B. The cross-price elasticity indicates that a 5% reduction in the price of personal computers will cause a 20% increase in software demand. Answer: False. The 5% decrease in the price of software programs will increase personal computer demand by 20% C. Demand for personal computers is price elastic and computers are cyclical normal goods
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 2

Econ - Darial [email protected] Managerial Economics 12:40...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online