econ 649
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2. (15 marks)
(a)Â (12 marks)Â (You need to read Frost, et al., p. 99-101 to answer this question)
(i)Â (3 marks)Â Assume that the demand for smoked salmon is represented by the following demand curve: P = 100 - 8Q.
Draw a diagram representing the demand curve and calculate the price elasticity of demand when the price equals $20.
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(ii)Â (3 marks)Â Now assume that there is an increase demand so that the new demand curve is:
P = 100 - 4Q.
On the same diagram used in (i) represent the new demand curve and calculate the price elasticity of demand when price equals $20.Â
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(iii)Â (3 marks)Â Now assume there is a further increase in demand so that the new demand curve is: P = 200 - 8Q.
On the same diagram used in (i) represent the new demand curve and calculate the price elasticity of demand when price equals $20.
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(iv)Â (3 marks)Â Can any relationship be established between the price elasticity of demand and the slope of a linear demand curve?
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(b)Â (3 marks)Â Consider good A the demand for which is Q = 100 when consumer income is $150 per week. When consumer income is observed to increase to $250 per week demand for good A is Q = 200.
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(i)Â (2 marks)Â Using the mid-point method, calculate the income elasticity of demand for good A.
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(ii)Â (1 mark)Â What does this tell us about good A?
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can you answer this ?
Answers
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Posted 17 May 2017 05:05 AM
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