ECON 2102 Fall 2012 Dr.

Sewell

name:

Homework 2-C Directions: This assignment is to be completed individually. It is due, in hard copy, at the beginning of class on Thursday, October 11th.

1. What is the elasticity of demand if a price change causes no change in quantity demanded? 0, PERFECTLY INELASTIC . ******************************************************************************* Answer questions 2-7 with reference to the following demand schedule for widgets: price ($ per widget) Quantity (# per month) 2 110 4 85 6 70 8 45 10 5 2. What is the elasticity of demand for widgets between $8 and $10? 7.27 (numeric answer required). 3. What is the elasticity of demand between $2 and $4? answer required). 4. As price decreases, demand becomes Less Elastic. 5. What is total revenue per month at a price of $4? 85x$4 = 340 . 0.39___(numeric

6-7 A reduction in price from $4 to $2 causes total revenue to fall because demand is inelastic. ******************************************************************************* 8. Price elasticity of demand is larger when good substitutes are available. 9. For an inferior good, income elasticity is negative. 10. If a 2% increase in the price of chocolate leads to a 4.6% decrease in the demand for marshmallows then the cross elasticity of demand equals ___-2.3___.