M0, Py0

Qx Px Py0 M0 M1 Py1 Qs ED = Qx - Qs Own Price Elasticity

117.15 1 10 10 15 5 3 114.15 -
116.8 2 10 10 15 5 6 110.8 0.003
116.1 4 10 10 15 5 12 104.1 0.006
115.4 6 10 10 15 5 18 97.4 0.012
114.7 8 10 10 15 5 24 90.7 0.018
114 10 10 10 15 5 30 84 0.024
113.3 12 10 10 15 5 36 77.3 0.031
112.6 14 10 10 15 5 42 70.6 0.037
111.9 16 10 10 15 5 48 63.9 0.044
111.2 18 10 10 15 5 54 57.2 0.050
110.5 20 10 10 15 5 60 50.5 0.057
109.8 22 10 10 15 5 66 43.8 0.063
109.1 24 10 10 15 5 72 37.1 0.070
108.4 26 10 10 15 5 78 30.4 0.077
107.7 28 10 10 15 5 84 23.7 0.084
107 30 10 10 15 5 90 17 0.091
106.3 32 10 10 15 5 96 10.3 0.098
105.6 34 10 10 15 5 102 3.59999999999999 0.105
104.9 36 10 10 15 5 108 -3.1 0.113
104.2 38 10 10 15 5 114 -9.8 0.120
103.5 40 10 10 15 5 120 -16.5 0.128
102.8 42 10 10 15 5 126 -23.2 0.135
102.1 44 10 10 15 5 132 -29.9 0.143
101.4 46 10 10 15 5 138 -36.6 0.151
100.7 48 10 10 15 5 144 -43.3 0.159
100 50 10 10 15 5 150 -50 0.167
99.3 52 10 10 15 5 156 -56.7 0.175
98.6 54 10 10 15 5 162 -63.4 0.183
97.9 56 10 10 15 5 168 -70.1 0.192
97.2 58 10 10 15 5 174 -76.8 0.200
 96.5 60 10 10 15 5 180 -83.5 0.209
95.8 62 10 10 15 5 186 -90.2 0.218
95.1 64 10 10 15 5 192 -96.9 0.227

Q.1 Determine the demand for goods x where Qx = 100 -0.35*px +1.5*py0 +0.25*M0
Q.2 Determine Qs where Qs = 3*px
Q.3 determine equilibrium price and equilibrium quantity when (a) py = pyo, M = M0 (b) py = py0 , M = M1, (c) py = py1
Q.4 Determine own price elasticty[ -(Q2 - Q1)/Q1]/[(p2-p1)/p1] {note the minus sign, which means that we are interested
Q.5 plot the relationship between price and elasticity as you established in Q.4 above
Q.6 Assume M = Mo and determine the cross price elasticity at each price level of px
Q.7 Plot the relationship between px and cross price elastivity as you derived in Q.6 above
Q.8 Assume py = pyo and determine income elasticity at each price level px
Q.9 Plot the relationship between px and income elasticity as you derived in Q.8 above.

Q.3 (a) Q.3 (b)

250 250
200 200
150 150
100 100
50 50
0 0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33
-50 -50
-100 -100
-150 -150

Qx Px Qs ED = Qx - Qs M1, Py0 Qx M1, Py0 ED Qs 3 Px 1

Q.3 (d) Q.5 Own Price Elasticity -

0.250
250
200
0.200
150
100 0.150
50
0 0.100
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33
-50
 0.250
250
200
0.200
150
100 0.150
50
0 0.100
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33
-50
-100 0.050
-150
0.000
Px Qs M1, Py1 M1,Py1 Px 2 6 10 14 18 22 26 30 34 38 42 46 50 54 58

Q.9 Income Elasticity

0.030

0.025

0.020

0.015

0.010

0.005

0.000
Px 2 6 10 14 18 22 26 30 34 38 42 46 50 54 58 62
Py0 M0 …………….. M1, Py0 M0, Py1 M1, Py1 M1, Py0 M0, Py1 M1,Py1
Income Elasticity Cross-Price Elasticity Qx Qx Qx ED ED ED
0.021 0.128 118.4 109.65 110.9 115.4 106.65 107.9
0.021 0.128 118.05 109.3 110.55 112.05 103.3 104.55
0.022 0.129 117.35 108.6 109.85 105.35 96.6 97.85
0.022 0.130 116.65 107.9 109.15 98.65 89.9 91.15
0.022 0.131 115.95 107.2 108.45 91.95 83.2 84.45
0.022 0.132 115.25 106.5 107.75 85.25 76.5 77.75
0.022 0.132 114.55 105.8 107.05 78.55 69.8 71.05
0.022 0.133 113.85 105.1 106.35 71.85 63.1 64.35
0.022 0.134 113.15 104.4 105.65 65.15 56.4 57.65
0.022 0.135 112.45 103.7 104.95 58.45 49.7 50.95
0.023 0.136 111.75 103 104.25 51.75 43 44.25
0.023 0.137 111.05 102.3 103.55 45.05 36.3 37.55
0.023 0.137 110.35 101.6 102.85 38.35 29.6 30.85
0.023 0.138 109.65 100.9 102.15 31.65 22.9 24.15
0.023 0.139 108.95 100.2 101.45 24.95 16.2 17.45
0.023 0.140 108.25 99.5 100.75 18.25 9.5 10.75
0.024 0.141 107.55 98.8 100.05 11.55 2.8 4.05
0.024 0.142 106.85 98.1 99.35 4.85 -3.9 -2.65
0.024 0.143 106.15 97.4 98.65 -1.85 -10.6 -9.35
0.024 0.144 105.45 96.7 97.95 -8.55 -17.3 -16.05
0.024 0.145 104.75 96 97.25 -15.25 -24 -22.75
0.024 0.146 104.05 95.3 96.55 -21.95 -30.7 -29.45
0.024 0.147 103.35 94.6 95.85 -28.65 -37.4 -36.15
0.025 0.148 102.65 93.9 95.15 -35.35 -44.1 -42.85
0.025 0.149 101.95 93.2 94.45 -42.05 -50.8 -49.55
0.025 0.150 101.25 92.5 93.75 -48.75 -57.5 -56.25
0.025 0.151 100.55 91.8 93.05 -55.45 -64.2 -62.95
0.025 0.152 99.85 91.1 92.35 -62.15 -70.9 -69.65
0.026 0.153 99.15 90.4 91.65 -68.85 -77.6 -76.35
0.026 0.154 98.45 89.7 90.95 -75.55 -84.3 -83.05
 0.026 0.155 97.75 89 90.25 -82.25 -91 -89.75
0.026 0.157 97.05 88.3 89.55 -88.95 -97.7 -96.45
0.026 0.158 96.35 87.6 88.85 -95.65 -104.4 -103.15

= py0 , M = M1, (c) py = py1 , M = M0 (d) py = py1, M = M1

h means that we are interested in absolute elasticity}

Q.3 (c)
250
200
150
100
50
0
19 21 23 25 27 29 31 33 -50
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33
-100
-150

Qs 3 Px 1 Px Qs M0, Py1 M0, Py1

lasticity - Q.7 Cross-Price Elasticity

0.180
0.160
0.140
0.120
0.100
0.080
0.060
 0.180
0.160
0.140
0.120
0.100
0.080
0.060
0.040
0.020
0.000
34 38 42 46 50 54 58 Px 2 6 10 14 18 22 26 30 34 38 42 46 50 54 58 62