ll T-Mobile Wi-Fi 9:15 PM @-, * 88% 2018 ASSIGNMENT 3.pdf 5 of 11 IN 621 / SUMME

Question

ll T-Mobile Wi-Fi 9:15 PM @-, * 88% 2018 ASSIGNMENT 3.pdf 5 of 11 IN 621 / SUMMER 2018 ASK?NMENT 3 Dr. FERNANDEZ DUE MONDAY, JULY 16 BY 11:59PM 5. Full in the blanks a The price elasticity of demand for a firm's product is equal to-2.23 over the range of prices being considered by the firm's manager. If the manager increases the price of the product by 9 percent, the manager prodicts the quantity demanded will lincrease, decrease) by percent. b The price elasticity of demand for an industry's demand curve is equal to-2.23 for the range of prices over which supply decreases. If total industry output is expected to decrease by 14 percent as a result of the supply decrease, managers in this industry should expect the market price of the good to (increase, decrease) by percent. hapies 5 nd FIN 621/Sr 2O Open With Print

Explanation / Answer

5. a) Ed = % change in quantity demanded / % change in price

- 2.25 = % change in quantity demanded / 9

% change in quantity demanded = - 2.25 x 9 = - 20.25

This implies increase in price causes decrease in quantity demanded by 20.25%.

b) Ed = % change in quantity demanded / % change in price

- 2.25 = - 14 / % change in price

% change in price = 14/2.25 = 6.22

So, market price increases by 6.22%.

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