Economics Assignment Help

Economics Assignment Help Economics Homework Help

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Economics assignment Sample Questions and Answers:

Question 1. Price of good X rises from $20 to $30 per unit. Consequently, its demand fails by 20 units and becomes 100 units >Determine price elasticity of demand.

Solution. Given P=$20 P1=$30

∆Q = 20units Q1

∆P= $10

∴

ep

∴

=100 units Q=120 ΔQ

=ΔP .

P Q

units

=

20 10

.

20 120

=

1 3

= 0.33

Question 2. Calculate the elasticity of demand by total expenditure method. (a)

Price($)

Total expenditure($)

5

40

6

30

Solution. It is a case of eD>1 or elastic demand. it is defined as a situation where with a rise in price , total expenditure falls.

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(b) Price($)

Total outlay($)

5

40

6

40

Solution. it is a case of eD = 1 because total expenditure remains unchanged with a rise in prise.

(c) Price($)

Total expenditure($)

5

40

6

50

Solution: it is a case of eD <1 or inelastic demand since total expenditure rises with a rise in price.

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Question 3. Originally, a product was selling for $10 and the quantity demanded was 1.000 units. The product price changes to $14 And as a result the quantity demanded changes to 500 units. Calculate the price elasticity Solution: P = $10

Q=1,000 units

P1=$14

eD=

Q1= 500 units Î&#x201D;Q Î&#x201D;P

.

P Q

=

500 4

x

10 1000

=

5 4

= 1.25

Question 4. Which of the following commodities have inelastic demand? Salt, a particular brand of Lipstic , medicine ,mobile phone and school uniform.

Solution: Salt, medicine, school uniform have inelastic demand as they do not have many substitutes. On the other hand mobile phone and a particular brand of lipstic has an elastic demand since they have many substitutes.

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Question 5.

Let the demand function be: Q=10-2p. Find eD at a price of 5/2

Solution: Q=10-2p. Differentially Q with respect to P, we get Also when P=5/2 Q =10-2

eD=

∴

5 2

ΔQ ΔP

ΔQ ΔP

= -2

=5 .

P Q

= -2 x

5/2 5

= -2

5 2

x

1 5

= [-1] =1

Question 6. Let eD = -0.4 . By what percentage the quantity demanded goes down if the price of the good increase by 4%?

Solution: eD =

|-04| =

%change in quantity demended % change in price

% change in quantity demanded 4

0.4 x 4 = 1.6

∴

% fall i aquantity

demanded is 0.4 * 4 = 1.6%

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