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assume you are selling a product in which at a price of $10, you can sell 90 units. When the price increases to $11, you can only sell 63 units.
1.assume you are selling a product in which at a price of $10, you can sell 90 units. When
the price increases to $11, you can only sell 63 units. Given this change in price and sales,
answer the following:
A.
What is the price elasticity of demand for your product?
B.
Is demand elastic, unit-elastic or inelastic?
C.
What is the change in revenue for this product from the price increase?
2.Compute and discuss elasticities for the following cases:
A.
When consumer income increases by 4%, the demand for Ramen Noodles decreases by
6%. What is the income elasticity for Ramen Noodles? Explain what this income
elasticity measure tells you.
B.
When the price of bread increases by 7%, the demand for butter decreases by 9%.
What is the cross price elasticity? How are the two goods related - are they substitutes
or complements? Explain why.
C.
When the price of pork increases by 8%, the quantity of lamb purchased increases by
5%. What is the cross price elasticity? How are the two goods related - are they
substitutes or complements? Explain why.
3.Explain the factors of production and give an example for each one.
4.an individual leaves a college faculty, where she was earning $50,000 a year, to begin a
new venture. She invests her savings of $20,000, which were earning 10 percent annually.
She then spends $20,000 renting office equipment, hires two students at $30,000/student a
year, rents office space for $15,000 and has other variable expenses of $50,000. At the
end of the year, her revenues are $240,000.
A.
What are her accounting profits for the year?
B.
What are her economic profits for the year?
(Be sure and show your work for both questions)
5.you expect to receive a payment of $600 one year from now. Answer the following
questions and show your calculations:
A.
The discount rate is 6%. What is the present value of the payment
to be received?
B.
Suppose that the discount rate rises to 7%. What is the present
value of the payment to be received?
C.
What will cause the present value of a future payment to decline?
