Andrew J. Buck
General Store sells Walter Mitty disposable fountain pens. The demand
function for this product is as follows:
Q = 15 - (3/5)P.
Q is the number of pens
sold per week and P is the price per pen.
1. Solve for P as a
function of Q. P =
2. Compute the point
price elasticity of demand (PED) when
12 Q = 6
Be sure to report
your elasticities as positive numbers.
Compute the point PED when
5/3 P = 6
Write the equation showing Thurberís pen total revenue (TR) as a function of
Total revenue is
Write the equation for the associated marginal revenue (MR) curve.
What is marginal revenue when Point Elasticity of Demand = 1?
Each of the
following statements provides information about an individualís demand for
some bakery product when its price changes. Use this information to decide
whether the individualís demand is elastic, inelastic, unitary elastic, or
indeterminate. Fill in each blank with the appropriate letter. Remember
that an individual's total expenditure on a product (= PQ) is the same as
the total revenue s/he generates for the industry producing the product.
When the price of Christmas pies went up 20%, Jack Horner purchased 50%
fewer than he
had the year before. Elastic
Tommy Tucker bought more white bread when the price fell.
10. When the price of
cakes declined by 15%, Marie Antoinette's total expenditure on
them stayed the
11. The pieman
lowered his price by $1.50 so Simple Simon bought six more pies than
12. The Queen of
Hearts spent less money on tarts when the price rose.
13. A certain king
enjoys blackbird pies. When pie prices doubled, he cut his
only 25%. Elastic
14. Amory Blaine was
observed buying fewer bacon buns but spending more on them.
15. The New York
Times reported on May 19, 1977 that U.S. per capita coffee
3.0 pounds in the first quarter of the year as compared to 3.6
pounds in the
first quarter of 1976. It also reported that retail coffee prices were
81% higher in
1977 than they were in 1976. Use the arc elasticity formula or the
elasticity formula to compute the PED for coffee.
To travel around Gotham City, some people take the subway and others ride
others use the Batmobile. Suppose the PED for subway trips by
1.4, the income elasticity of demand for subway trips is 0.6, and
the cross PED
for subway trips with respect to the price of bus trips is 0.8. Subway
fares rise by
10%. How much will bus fares have to rise to offset the effect of the
increase on the quantity of subway trips demanded?
When lottery tickets cost $2, Shirley Jackson purchases 12 per week. When
cost $3, she
purchases 9 per week. Compute her arc PED.
Montresor Fortunatoís PED for amontillado (a pale dry sherry) is known to be
when price is
measured in dollars and quantity is measured in bottles (32 oz.). What
is his PED for
this product if price is measured in cents and quantity in ounces?
Using the arc elasticity formula, calculate the elasticity of demand for
China based on the
information provided by the attached article from The New York