ECON-12200

Principles of Microeconomics
Dr. Kolberg

Project 5
For this project, first work through Chapter 5 of the text. Follow the directions as you go and
run Market Period 2. When you are done, complete the questions below.

Open Excel and use File|Open to open your MrktSim_m1p2 file in your
MarketSim|Competition folder.

1. Open your saved Market Summary Worksheet file1.

Add the data on your Market Summary Worksheet for your Market 1, Period 2.
Save this file so that you may return later to add more data.
Print a copy of your Market Summary worksheet completed for Periods 0-2.

2. Make a prediction about how HPS is likely to change in Period 3.

HPS will (increase / decrease / not change) in Period 3.

3. Justify your prediction in question 2 based on results from Period 2.

4. Copy the work you have completed on p. 91 of Chapter 5 in your text below:

HPS(2) =__________ QD(2) =_____________

HPS(1) =__________ QD(1) =_____________

Calculate EHPS here using equation (5):

EHPS = [ _________ ]

5. What is the interpretation of the above calculation?

(Refer to the section "Interpreting Market Demand Elasticity Coefficients" in Chapter 5

1If you did not save this. you can find one in the Resources|Projects folder on our Sakai site. You will have to enter
data for Periods 0-1 before doing question 1.
 of your course manual for this).

6. Record the absolute value of your market demand elasticity coefficient below.

|EHPS| = __________________________

7. Classify the market demand using your |EHPS|, and circle the result below:

Elastic, Unit Elastic, or Inelastic.

8. Based on your calculation for |EHPS| the quantity change is (greater / equal to / less than)
the price change in my Market 1 between Periods 1 and 2.

9. The HPS (increased/ stayed the same/ decreased) from Period 1 to Period 2 in my Market 1.

10. Based on my answers to 8, and 9 above, Total Sales Revenues earned in my Market 1 as a
whole (increased /remained the same/ decreased) from Period 1 to Period 2.

11. Explain why.

Attached:
_____Market Information Reports for Periods 1 and 2
_____Market Summary Worksheet with data for Periods 0-2