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The percentage problem and the basics of elasticity

(a) Suppose your hourly wage falls from $20 to $10. What is the regular percentagedecrease? What is the arc percentage decrease?

(b) Suppose your hourly wage increases from $10 to $20. What is the regular percentage decrease? What is the arc percentage decrease? Compare your result to part (a).

(c) Suppose the price of celeriac decreases from $80 to $60, and the quantity demanded increases from 100 to 150 bushels. What is the price elasticity of demand using the standard percentage formulas? What is the arc price elasticity of demand?

(d) Suppose the price of celeriac increases from $60 to $80, and quantity demanded decreases from 150 to 100 bushels. What is the point price elasticity of demand? What is the arc price elasticity of demand? Compare your calculations here with the calculations you made in (c).

(e) Suppose the demand for rutabaga is given by:

Demand: Q = 50 – 0.5P Find the price elasticity of demand when price is $60 using the point elasticity of demand formula.

(f) From the demand curve in part (e), what is the price elasticity of demand when the price decreases from $60 to $40 using the standard percentage change formulas? What is the arc price elasticity of demand? Compare your findings to those you found in (e).

Microeconomics, Economics

  • Category:- Microeconomics
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