Question 2 Flashcards
1
Q
Calculate demand equation
A
P=a-bQ Elasticity = P/Qx1/slope 0.5=2/40x1/slope 0.5 slope =2/40=0.5/slope 0.5 slope=0.05/0.5 =0.1 Slope=0.1 P=a-bQ a=p+bQ a=2+0.1x40 a=2+4=6 P=6-0.1Q
2
Q
What will happen to weekly consumption if price increases to $4 Q=20million per week
A
Slope =~0.1 P2= $4 Q=? P=6-0.1Q 0.1Q=6-p 0.1Q=6-4 0.1Q=2 Q=2/0.1 Q=20million per week
3
Q
If corn chips equals p=$2 Demand elasticity 0.5 (ignore negative sign) Q=40 m packets What is the assumption?
A
Single point elasticity method b= slope
