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The table below shows part of the aggregate demand schedule for smart phones in the country of Afluentia: Quantity demanded Price P $900 10,000 $700 14,000 i. Plot the demand curve for smart phones in Afluentia. Assume demand is linear. Calculate the price elasticity of demand when the price increases from $700 to $900 using the midpoint method. Make your calculations explicit. i. All else being the same, what is Afluentia's total expenditure on smart phones when the price is $700? And when the price is $900? All else being the same, should Afluentia's suppliers charge $700 or $900 for a smart phone? Why? Explain briefly; show graphically and make your calculations explicit. i. Now suppose younger people start also buying smart phones in Afluentia. This means 1,000 more smart phones are bought at any given price. As price increases from $700 to $900, is the price elasticity of aggregate demand now greater than, less than, or the same as it was in part (i)? Why? Explain briefly. Make any calculations explicit.

The table below shows part of the aggregate demand schedule for smart phones in the country of Afluentia: Quantity demanded Price P $900 10,000 $700 14,000 i. Plot the demand curve for smart phones in Afluentia. Assume demand is linear. Calculate the price elasticity of demand when the price increases from $700 to $900 using the midpoint method. Make your calculations explicit. i. All else being the same, what is Afluentia's total expenditure on smart phones when the price is $700? And when the price is $900? All else being the same, should Afluentia's suppliers charge $700 or $900 for a smart phone? Why? Explain briefly; show graphically and make your calculations explicit. i. Now suppose younger people start also buying smart phones in Afluentia. This means 1,000 more smart phones are bought at any given price. As price increases from $700 to $900, is the price elasticity of aggregate demand now greater than, less than, or the same as it was in part (i)? Why? Explain briefly. Make any calculations explicit.

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter5: Elastic And Its Application
Section: Chapter Questions
Problem 7PA: Suppose that your demand schedule for pizza is as follows: a. Use the midpoint method to calculate...
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The table below shows part of the aggregate demand schedule for smart phones in the country of Afluentia: Quantity demanded Price P QD $900 10,000 $700 14,000 i. Plot the demand curve for smart phones in Afluentia. Assume demand is linear. Calculate the price elasticity of demand when the price increases from $700 to $900 using the midpoint method. Make your calculations explicit. ii. All else being the same, what is Afluentia's total expenditure on smart phones when the price is $700? And when the price is $900? All else being the same, should Afluentia's suppliers charge $700 or $900 for a smart phone? Why? Explain briefly; show graphically and make your calculations explicit. iii. Now suppose younger people start also buying smart phones in Afluentia. This means 1,000 more smart phones are bought at any given price. As price increases from $700 to $900, is the price elasticity of aggregate demand now greater than, less than, or the same as it was in part (i)? Why? Explain briefly. Make any calculations explicit. iv. We now take a longer time period into consideration and look at the market for smart phones in the long run. In the long run the quantity demanded at any given price by all buyers (including the younger ones) is 10% higher. As price increases from $700 to $900, is the price elasticity of demand in the long + run greater than, less than, or the same as it was in part (i)? Is it greater than, less than, or the same as it was in part (i)? Why? Explain briefly and show with numbers. Make any calculations explicit. v. In the long run, all else being the same, should Afluentia's suppliers charge $700 or $900 for a smart phone? Why? Explain briefly; show graphically and make your calculations explicit.
Transcribed Image Text:The table below shows part of the aggregate demand schedule for smart phones in the country of Afluentia: Quantity demanded Price P QD $900 10,000 $700 14,000 i. Plot the demand curve for smart phones in Afluentia. Assume demand is linear. Calculate the price elasticity of demand when the price increases from $700 to $900 using the midpoint method. Make your calculations explicit. ii. All else being the same, what is Afluentia's total expenditure on smart phones when the price is $700? And when the price is $900? All else being the same, should Afluentia's suppliers charge $700 or $900 for a smart phone? Why? Explain briefly; show graphically and make your calculations explicit. iii. Now suppose younger people start also buying smart phones in Afluentia. This means 1,000 more smart phones are bought at any given price. As price increases from $700 to $900, is the price elasticity of aggregate demand now greater than, less than, or the same as it was in part (i)? Why? Explain briefly. Make any calculations explicit. iv. We now take a longer time period into consideration and look at the market for smart phones in the long run. In the long run the quantity demanded at any given price by all buyers (including the younger ones) is 10% higher. As price increases from $700 to $900, is the price elasticity of demand in the long + run greater than, less than, or the same as it was in part (i)? Is it greater than, less than, or the same as it was in part (i)? Why? Explain briefly and show with numbers. Make any calculations explicit. v. In the long run, all else being the same, should Afluentia's suppliers charge $700 or $900 for a smart phone? Why? Explain briefly; show graphically and make your calculations explicit.
e) Suppose GK is one of the firms in this industry. In the short run GK treats the rent of its building as a fixed cost and labor as a variable cost. If rent for the building falls, explain briefly how this will affect GK's costs in the short run, specifically: the average variable cost curve, the average total cost curve, and the marginal cost curve
Transcribed Image Text:e) Suppose GK is one of the firms in this industry. In the short run GK treats the rent of its building as a fixed cost and labor as a variable cost. If rent for the building falls, explain briefly how this will affect GK's costs in the short run, specifically: the average variable cost curve, the average total cost curve, and the marginal cost curve
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