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1. a. Determine the price elasticity of demand at each quantity demanded using the arc or midpoint formula: Percentage change in quantity demanded = (Q2 – Q1)/Qı divided by percentage change in price = (P2 – P;) /P1. b. Redo exercise la using price changes of $10 rather than $5. 2. Plot the price and quantity data given in the demand schedule of exercise 1. Put price on the vertical axis and quantity on the horizontal axis. Indicate the price elas- ticity value at each quantity demanded. Explain why the elasticity value gets smaller as you move down the demand curve. 3. What would a 10 percent increase in the price of movie tickets mean for the quantity demanded of a movie the- ater if the price elasticity of demand was 0.1, 0.5, 1.0, and 5.0? 4. Using the demand curve plotted in exercise 1, illustrate what would occur if the income elasticity of demand was 0.05 and income rose by 10 percent. If the income elasticity of demand was 3.0 and income rose by 10 per- cent, what would occur? 5. Pick a good whose demand is price elastic. List five sub- stitutes and five complements. Which is easier to come up with, the list of substitutes or the list of comple- ments? Explain. 6. Are the following pairs of goods substitutes or comple- ments? Indicate whether their cross-price elasticities are negative or positive. a. Bread and butter b. Bread and potatoes c. Socks and shoes d. Tennis rackets and golf clubs e. Bicycles and automobiles f. Foreign investments and domestic investments

1. a. Determine the price elasticity of demand at each quantity demanded using the arc or midpoint formula: Percentage change in quantity demanded = (Q2 – Q1)/Qı divided by percentage change in price = (P2 – P;) /P1. b. Redo exercise la using price changes of $10 rather than $5. 2. Plot the price and quantity data given in the demand schedule of exercise 1. Put price on the vertical axis and quantity on the horizontal axis. Indicate the price elas- ticity value at each quantity demanded. Explain why the elasticity value gets smaller as you move down the demand curve. 3. What would a 10 percent increase in the price of movie tickets mean for the quantity demanded of a movie the- ater if the price elasticity of demand was 0.1, 0.5, 1.0, and 5.0? 4. Using the demand curve plotted in exercise 1, illustrate what would occur if the income elasticity of demand was 0.05 and income rose by 10 percent. If the income elasticity of demand was 3.0 and income rose by 10 per- cent, what would occur? 5. Pick a good whose demand is price elastic. List five sub- stitutes and five complements. Which is easier to come up with, the list of substitutes or the list of comple- ments? Explain. 6. Are the following pairs of goods substitutes or comple- ments? Indicate whether their cross-price elasticities are negative or positive. a. Bread and butter b. Bread and potatoes c. Socks and shoes d. Tennis rackets and golf clubs e. Bicycles and automobiles f. Foreign investments and domestic investments

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1. a. Determine the price elasticity of demand at each quantity demanded using the arc or midpoint formula: Percentage change in quantity demanded = (Q2 – Q1)/Qı divided by percentage change in price = (P2 – P;) /P1. b. Redo exercise la using price changes of $10 rather than $5. 2. Plot the price and quantity data given in the demand schedule of exercise 1. Put price on the vertical axis and quantity on the horizontal axis. Indicate the price elas- ticity value at each quantity demanded. Explain why the elasticity value gets smaller as you move down the demand curve. 3. What would a 10 percent increase in the price of movie tickets mean for the quantity demanded of a movie the- ater if the price elasticity of demand was 0.1, 0.5, 1.0, and 5.0? 4. Using the demand curve plotted in exercise 1, illustrate what would occur if the income elasticity of demand was 0.05 and income rose by 10 percent. If the income elasticity of demand was 3.0 and income rose by 10 per- cent, what would occur? 5. Pick a good whose demand is price elastic. List five sub- stitutes and five complements. Which is easier to come up with, the list of substitutes or the list of comple- ments? Explain. 6. Are the following pairs of goods substitutes or comple- ments? Indicate whether their cross-price elasticities are negative or positive. a. Bread and butter b. Bread and potatoes c. Socks and shoes d. Tennis rackets and golf clubs e. Bicycles and automobiles f. Foreign investments and domestic investments
Transcribed Image Text:1. a. Determine the price elasticity of demand at each quantity demanded using the arc or midpoint formula: Percentage change in quantity demanded = (Q2 – Q1)/Qı divided by percentage change in price = (P2 – P;) /P1. b. Redo exercise la using price changes of $10 rather than $5. 2. Plot the price and quantity data given in the demand schedule of exercise 1. Put price on the vertical axis and quantity on the horizontal axis. Indicate the price elas- ticity value at each quantity demanded. Explain why the elasticity value gets smaller as you move down the demand curve. 3. What would a 10 percent increase in the price of movie tickets mean for the quantity demanded of a movie the- ater if the price elasticity of demand was 0.1, 0.5, 1.0, and 5.0? 4. Using the demand curve plotted in exercise 1, illustrate what would occur if the income elasticity of demand was 0.05 and income rose by 10 percent. If the income elasticity of demand was 3.0 and income rose by 10 per- cent, what would occur? 5. Pick a good whose demand is price elastic. List five sub- stitutes and five complements. Which is easier to come up with, the list of substitutes or the list of comple- ments? Explain. 6. Are the following pairs of goods substitutes or comple- ments? Indicate whether their cross-price elasticities are negative or positive. a. Bread and butter b. Bread and potatoes c. Socks and shoes d. Tennis rackets and golf clubs e. Bicycles and automobiles f. Foreign investments and domestic investments
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