1

QUESTION 2:

Construct a demand curve base on the demand schedule and make a short analysis.

PRICE QUANTITY DEMANDED

(PESO) PER MONTH

15 1
12 2
9 3
6 5
3 7

Demand
15
14
13
12
P 11 The demand curve shows the inverse relation
R 10 between prices and demands for as the price
increase the quantity decreases and when the price
I 9 decrease the quantity increase due to this inverse
C 8 relationship demand curve slopes downward from
left to right. This kind of slope is called negative
7
E 6
slope.

5
4
3
2
1
0 1 2 3 4 5 6 7

QUANTITY

MANAGERIAL ECONOMICS
 2

Construct a demand schedule base on the demand curve and make a short analysis.

PRICE Quantity Demanded

($/ Liter) (Km/Semester)
4.8 0
3.5 50
2.4 100
1.6 150
0.9 200
0.4 250
0.0 300

When the price falls from 4.8$ to 3.5$ per liter

the quantity demanded increases from 0 to 50
km/Semester. In the same way as price falls,
quantity demanded increases.

MANAGERIAL ECONOMICS
QUESTION 3:

1. Suppose price rises from P15 to P17 and quantity demanded decreases by 20%. Compute the elasticity of demand?
160 or 1.6%

2. How to calculate price elasticity of demand? By the % of the change in equity over the % change in price

3. A business puts up its prices by 10%. Explain whether demand is elastic or inelastic if sales fall by:

a) 8% = 8% / 10% = 0.8 is the elasticity of demand or the change in demand for product is proportionally less than the
change in price therefore it is inelastic for is less than one.

b) 12% = 12% / 10% = 1.2 is the elasticity of demand or the change in demand for product is proportionally greater than
the change in price therefore it is considered an elastic for it is greater than one.

c) 17% = 17% / 10% = 1.7 is the elasticity of demand or the change in demand for product is proportionally greater than
the change in price therefore it is considered an elastic for it is greater than one.

4. Calculate the price elasticity of demand if:

a) Price goes up 20% leading to a fall in quantity demanded of 10%

10% / 20% = 0.5 is the elasticity of demand

b) Price falls by 5% leading to a rise in quantity demanded of 10%

10% / 5% =2 is the elasticity of demand

5. Over the last 14 months a power company has increased its price for electricity by 40%, demand has fallen by
6%. What is the price elasticity of demand? Is this demand elastic or inelastic?

6% / 40% = 0.15 this is

QUESTION 4:

Construct a comparison and contrast matrix of the following types of market structure.

Perfect Competition, Monopolistic Competition, Monopoly, and Oligopoly

Type Number Barriers

Market Of of Price Selling To Examples
Structures Products Firms cost Entry &
exits
Perfect Products are Many They are Selling Cost No
identical price takers do not play barriers Agriculture
Competition any role

Monopolistic Products are Many They are Selling cost Freedom

differentiated price has an of Entry
Competition important
markers and Exits Restaurants
role
Monopoly Products are One They are Selling cost Effective
Unique no price is barriers to electricity
substitutes makers unnecessar entry
y
Oligopoly Products are Few Price setter Selling cost Some
identical or has an barriers to Smart
differentiated important entry phones
role