Module 3 Assignment No.

3
Part 1. Read and Analyze each question carefully and answer the following
questions on the space provided.
1. The demand for good X has been estimated by Q xd = 12 − 3Px + 4Py. Suppose
that good X sells at 2 php per unit and good Y sells for 1 php per unit. Calculate
the own price elasticity.
Given: Px = 2, Py = 1
Qd = 12 – 3(2) + 4(1) = 10
∆ Q Px 2
ε x= ×
∆P Q ( )
=−3
10
=−0.6 Good X is inelastic

∆ Q Py 1
ε =
y × =4 ( )=0.4 Good Y is inelastic
∆P Q 10

2. Suppose Q xd = 10,000 − 2 Px + 3 Py − 4.5M, where Px = 100 php, Py = 50 php,

and M = 2,000 php. Compute for the own price elasticity of demand.
Given: Px = 100, Py = 50, M = 2,000
Qd = 10,000 − 2 (100) + 3 (50) − 4.5 (2,000) = 950
∆ Q Px 100
ε x= ×
∆P Q ( )
=−2
950
=−0.21 Good X is inelastic

∆ Q Py 50
× =3 (
950 )
ε =
y =0.15(rounded up=0.16) Good Y is inelastic
∆P Q

3. Suppose the demand function is Q xd = 100 − 8Px + 6Py – M. If Px = 4 php, Py = 2

php, and M = 10 php, determine the cross-price elasticity of good x with respect to
the price of good y.
Given: Px = 4, Py = 2, M = 10
Qd = 100 – 8 (4) + 6 (2) – 10 = 70
∆ Qx Px 2
ε c= ×
∆ Py Qx
=6 ( )
70
=0.17

4. Suppose the demand function is given by Qxd = 10Px0.9 Py0.5 M0.22 H. Calculate the
cross-price elasticity between goods x and y.
ln Qd = ln 100 + 0.9 ln Px + 0.5 ln Py + 0.22 ln M + ln H
Cross-price elasticity of demand = 0.50 (Coefficient of Py)
X and Y are complements
Part 2. No. 5.
Direction: Read and analyze each question carefully (refer to table 1 to answer the
following questions).
5.1 The demand function in the accompanying table is QXd = 100 − 2PX. Based on
this information, when: QX = 80, the price, PX (point A)?
80 = 100 − 2PX
Point A = 10 php
5.2 The demand function in the accompanying table is QXd = 100 − 2PX. Based on
this information, if Px = 30 php QXd = (point B)?
QXd = 100 – 2(30)
Point B = 40 units
5.3 The demand function in the accompanying table is QXd = 100 − 2PX. Based on
this information, when: compute the own price elasticity of demand when PX = 25
php (point C)?
∆ Q Px 25
ε x= ×
∆P Q
=−2( )
50
=−1

Point C = -1 Good X is Unitary Elastic

5.4 The demand function in the accompanying table is QXd = 100 − 2PX. Compute
the total revenue when QX = 20 (point D)?
Total Revenue = (Px)(Qx) = (40)(20)
Point D = 800 php