Assignment 2

MEB, SEM-1

Solve the following questions and submit it by 22/10/2010. Any submission after due
date will be subject to negative marking.

Q1. A firm increases the price of product A, from 50p to 60p, demand falls from 1000
units a week, to 900 units a week. What is the Price elasticity of demand of the product?

Q2. The government has measured an increase of average incomes of 10% over the last
year. A firm selling holidays has measured its Income Elasticity of Demand at 2.5. What
will be the firms % increase in sales?

Q3. A firm markets a product with a Price Elasticity of Demand of 0.75. What will be the
effect on revenues of a decrease in price?

Q4. A firm decreases the price of product A from 60p to 50p, sales before the price
reduction were at 3,000 week, The products Price Elasticity of demand is 1.5. What will
be the new level of weekly revenue, following the price reduction?

Q5. A computer firm has just launched its new intelligent mouse onto the market.
Demand is currently at 300 units a week. The company doubles its advertising budget,
knowing that the products Advertising Elasticity of Demand is 2. What will be the new
quantity demanded?

Q6. Draw a trend line by the method of semi-averages

Year 1993 1994 1995 1996 1997 1998 19999 2000

Sales 210 200 215 205 220 235 210 235

Q7. Calculate three yearly moving average of the following data

Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
No. of 15 18 17 20 23 25 29 33 36 40
Students

Q8. Fit a straight line trend by the method of least squares to the
following data and calculate trend values.

Year 1996 1997 1998 1999 2000

Sales of TV 4 6 7 8 10
sets in
(ooo’s )
Estimate the sales for the year 2005.