1.Explain the term Price Elasticity of Demand. When a firm raises the price of a commodity from $10 to $20, the quantity demanded falls from 10 units to 2. Calculate the price elasticity of demand using the average price method.

2. What is the Cross Price Elasticity of Demand? Explain how it helps identify complements and substitutes?

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Casey DurganLv2

23 Feb 2019

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When the price of a commodity falls by Rs.2 per unit, its quantity demanded increases by 10 units. Its price elasticity of demand is (-)1. Calculate its quantity demanded at the price before change which was Rs.10 per unit.

29. Given the following demand and cost functions, determine the output and sales level that maximize profit.
Demand Function: Q = 25- P; Cost Function: TC = 20+5Q +Q2 (Points : 1) 20 Units
200 Units
5 Units
None of the Above

30. Assume the price of product B, increases from $1 to $1.50. As a result, the quantity demanded of product "A increases from 500 to 600 a month. This indicates that the cross-price elasticity and relationship between the two products. (Points : 1)

.50, Substitutes
.45, Substitutes
.45, Complements
.50, Complements
Products are not related

31. Given the marginal revenue from a product is $15 and the price elasticity of demand is -1.2, what is the price of the product? (Points : 1)

Not enough Information
$8
$88
$42
$68

32. Given the demand function: QD = -10-2.1 P +.62 Y. Where P is price and Y is Income (Points : 1)

For a 1% increase in price, quantity demanded falls by 2.1%
For a 1% increase in price, quantity demanded increases by .62%.
For a 1% decrease in price, quantity demanded increases by 2.72%
None of the above

1. Suppose the price elasticity of demand for bread is 1.00. If the price of bread falls by 20%, the quantity demanded will increase by:

2. Suppose that a 20% decrease in the price of good Y causes a 20% increase in demand for good X. The coefficient of cross-price elasticity of demand is:

3. When the price of a quart of milk increased from $1.55 to $2.00 the quantity demanded decreased from 21,000 per day to 19,000 per day. In this range, the price elasticity of demand is:

4. If the elasticity of supply for crude oil is 0.5, how much will the price have to increase to increase production by 20%?

5. Demand for X increases from 100 to 125 when the price of Y increases from $5 to $6. The cross-price elasticity of demand is:

6. Demand for X increases from 100 to 125 when the price of Y increases from $5 to $6. The cross-price elasticity of demand is:

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