saad karimi (assignment 3)

8/15/2019 Saad Karimi (Assignment 3)

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MANAEGERIAL ECONOMICS

ASSIGNMENT # 3

CHAPTER 6 & 7

PREPARED BY

SAAD KARIMI (4123541)

DATED: 5TH EB


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CHAPTER 6

TECHNICAL PROBLEMS:!"ESTION 2:Fill in the blanks:

a. The price elasticity of demand for a firm’s product is equal to 21.5 over the range of prices being considered by the firm’s

manager. f the manager decreases the price of the product by ! percent" the manager predicts the quantity demanded

#ill $$$$$ %increase" decrease& by $$$$$$ percent.

b. The price elasticity of demand for an industry’s demand curve is equal to 21.5 for the range of prices over #hich supply

increases. f total industry output is e'pected to increase by () percent as a result of the supply increase" managers in this

industry should e'pect the market price of the good to$$$$$$ %increase" decrease& by $$$$$ percent.

ANSER:

$) increase" 1.2* or 12*+%) increase" ).)12 or 1.2+

!"ESTION 7: ,se the graph on the ne't page to ans#er the follo#ing questions:

a. The interval elasticity of demand over the price range -( to -5 is .

b. The interval elasticity of demand over the price range -1) to -11 is .

c. The interval elasticity of demand over the price range -5 to - is .

ANSER:

/ 0 hange in ' 3verage 4 hange in 4 3verage

$) ).5%) .)) 1.)

!'*+,- 11: uppose the demand for good 6 is 0 2)478.a. 9hen 4 0 -1" total revenue is $$$$$ .b. 9hen 4 0 -2" total revenue is $$$$$.c. 9hen 4 0 -" total revenue is $$$$$ .d. The price elasticity of demand is equal to $$$$$ at every price. 9hy;

ANSER:$) 0 2) " 4 0 1" T< 0 2)%) 0 1) " 4 0 2" T< 0 2)) 0 5 " 4 0 " T< 0 2).) /lasticity 0 1 at every point because percentage change in both the variables is equal.

!"ESTION 16: The general linear demand for good 6 is estimated to be 0 25)"))) = 5))4 = 1.5)> = 2)4< #here 4 is the price of good 6" > is average income of consumers #ho buy good 6" and 4< is the price of related good . s good 6 normal or inferior; /'plain ho# a percent increase in income #ould affect demand for 6" all other factors affecting the demand for 6 remaining the same.


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d. alculate the cross=price elasticity /6


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d& 3re the parameter estimates G a " G b " G c " and G d statistically significant at the 5 percent level of significance;e& ,sing the values 4 0 225" > 0 2")))" and 4< 0 !)" calculate estimates of

%1& The price elasticity of demand % G/ &.%2& The income elasticity of demand % G/ >&.%(& The cross=price elasticity % G/ 6

saad karimi (assignment 3)

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