Determine the price elasticity of demand for a microwave that experienced a 20% drop in price and a 50% increase in weekly demand quantity.
I know I have to use the price elasticity of demand formula, but I keep getting the wrong answer. Can someone please help me?
The price elasticity of demand for color TVs is estimated to be -2.5. If the price of color TVs is reduced by 20%, how much percentage increase in the quantity of color TVs sold do you expect?
Suppose that output is a function of labor and capital. Assume that labor is the variable input and capital is the fixed input. Explain the law of diminishing marginal product. How is the law of diminishing marginal product reflected in the total product of labor curve?
Price (In Birr) Quantity Demanded (Per Month) Quantity Supplied (Per Month)
3 1,200 600
6 1,000 700
9 800 800
12 600 900
15 400 1,000
From your knowledge of the relationships among the various types of costs, complete the following table.
Output Total Total Cost Fixed
Cost
100 $ 260 $ ____ 200 ______ ______ 300 ______ ______ 400 ______ ______ 500 ______ ______ 600 ______ ______ 700 _____ ______
800 2,040 ______
Total Variable Cost
$ 60 _______ _______ _______ 360 _______ _______
_______
Average Fixed Cost
2 ______ ______ ______ ______ ______ ______
_______
Average Variable Cost
0.6 ______ 0.50 ______ ______ ______ 1.60
_______
Average Total Cost
2.6 ______ ______ 1.05 ______ ______ ______
_______
Marginal Cost
______ 0.30 ______ ______ ______ 3.00 ______
_______
To determine the price elasticity of demand, you need to use the following formula:
Price elasticity of demand = (% change in quantity demanded) / (% change in price)
In this case, you have a 20% drop in price and a 50% increase in weekly demand quantity. Let's calculate the price elasticity of demand step by step:
Step 1: Calculate the percentage change in quantity demanded.
Percentage change in quantity demanded = [(New quantity demanded - Old quantity demanded) / Old quantity demanded] × 100%
In this case, the new quantity demanded is 50% higher than the old quantity demanded. Therefore:
Percentage change in quantity demanded = [(50 - 0) / 0] × 100% = infinity
Step 2: Calculate the percentage change in price.
Percentage change in price = [(New price - Old price) / Old price] × 100%
In this case, the price dropped by 20%. Therefore:
Percentage change in price = [(-20) / 100] × 100% = -20%
Step 3: Calculate the price elasticity of demand.
Price elasticity of demand = (% change in quantity demanded) / (% change in price)
Price elasticity of demand = infinity / -20%
At this point, we get an indeterminate form of infinity over a negative value. This suggests that the price elasticity of demand is undefined in this specific scenario.
It's worth noting that in practical terms, a price elasticity of demand that approaches infinity indicates an extremely elastic demand, meaning that even a small change in price has a large impact on the quantity demanded. However, due to the negative sign in the denominator, the calculation becomes undefined.