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Which is the correct formula for calculating the percent change in price from a shift in demand? O %AP %AP = % AP - %ΔΡ = %AD ED + Es %AD Es + ED - (% AS) ED + Es %AD Ep + Es

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Which is the correct formula for calculating the percent change in price from a shift in demand?
%AD
ED + Es
%AP =
%AP=
%ΔΡ -
%ΔΡ
-
%AD
Es + ED
(%AS)
Ep + Es
%AD
Ep + Es

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In a particular market, demand and supply curves are defined by the following equations: P=50 – 0.5QD QS= -20 + 2P where, P is the price in pounds, QS is the quantity supplied and QD is the quantity demanded. 1. What is the equilibrium price and quantity? 2. What is the price elasticity at a price of £35? 3. What do you expect will happen to total expenditure on this good if the price increases from £35 to £40? Is this expectation confirmed if you calculate the total revenue for each price?