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Demand schedule for the computer chips is in the table below:

1414_computer chips demand.jpg

Q1. Illustrate what happens to the total revenue if the price drops from $400 to $350 a chip and from $350 to $300 a chip? Describe your answer.

Q2. At an average price of $300, is the demand for chips elastic, inelastic or the unit elastic? Describe your answer by using the total revenue test.

If Rie’s income was $3,000, she purchased 5kgs of rice and 2kgs of beef a month. Now her income is $4,000 and she purchases 4kgs of rice and 3kgs of beef a month.

Q3. Compute Rie’s income elasticity of the demand for beef. Show your computation.

Q4. Compute Rie’s income elasticity of the demand for rice. Is rice normal good or poorer good? Show your computation.

Assume that a drought cuts the quantity of wheat grown by 3 percent.

Q5. If the price elasticity of demand for wheat is 0.3, by how much will the price of wheat increase? Show your computation.

Q6. If pasta makers estimate that this modification in the price of wheat will raise the price of pasta by 20 percent and reduce the quantity demanded of pasta by 5 percent, what is the pasta maker’s estimate of the price elasticity of demand for the pasta? Show your computation.

Q7. If pasta sauce makers estimate that, with the alteration  in the price of pasta, the quantity of pasta sauce demanded will reduce by 4 percent, what is the pasta sauce maker’s estimate  of the cross elasticity of the demand for pasta sauce with respect to price of pasta?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M99306

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