The gondwanaland chairman of production reported that

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3. The Gondwanaland Chairman of Production reported that the new Altair chariots (most modern, horse drawn family chariot) had a PRICE elasticity of 3 and an INCOME elasticity of 2. The supply of these Altair chariots is elastic. Evaluate the following statements and explain why you think they are true, or false. a. A 20% increase in the price of the Altair chariot will cause the quantity demanded to fall by an astounding 60%. This statement is true. The price elasticity is calculated be the percent change in quality demand divided be the percent change in the price. An increase in price would mean a decrease in the demand (calculations below, to verify statement) The price elasticity = (% change in demand) 60/20(% change in price) The price elasticity = 3 b. An increase in Gondwanaland consumers’ incomes will cause prices to rise, but the total quantity demanded will also increase. This statement is true. income Elasticity of Demands affects the percent change in the quantity demand, its like a train reaction. So as the consumers income increase, the prices will also increase, causing the demand to grow. -------------------------------------------- References: Krugman, P. R., & Wells, R. (2015). Microeconomics. New York, NY: Worth. Unit 4 Assignment: Elasticity of Demand Grading Rubric Content Percent Possible Points Possible Full Assignment 100% 40 v.6.16.17 5 of 5
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Unit 4 AB224 | Microeconomics Overall Writing: 20% 8 Correct coversheet information at the top of 1st page 5% 2.00 APA format for answers 3% 1.20 Correct citations 3% 1.20 Standard English, no errors 4% 1.60 At least one, or more, references 5% 2.00 Answers: provides complete information demonstrating analysis and critical thinking: 80% 32 Individual Questions: 1. a. - Are the utility maximizing quantities 3 sandwiches and 3 fries? Why? 5% 2.00 1. b. - Are the utility maximizing quantities 2 sandwiches and 4 fries? Why? 5% 2.00 1. c. - Are the utility maximizing quantities 3 sandwiches and 4 fries? Why? 5% 2.00 1. d. - Are the utility maximizing quantities 4 sandwiches and 2 fries? Why? 5% 2.00 2. a. - What is price elasticity of demand for gosum berries? 15% 6.00 2. b. - What is year 107 revenue and the year 108 revenue? 10% 4.00 2. c. - Could change in revenue been predicted from elasticity? How? 15% 6.00 3. a. - Will quantity of Altair chariots demanded fall by 60%? (true/false) Why? 10% 4.00 3. b. - Will quantity of Altair chariots demanded increase? (true or false) Why? 10% 4.00 Sub-total for Individual Questions: 80% 32 v.6.16.17 6 of 5
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