2.Suppose the price of IBM computers falls from $2500 to 2000 and the quantity d

Question

2.Suppose the price of IBM computers falls from $2500 to 2000 and the quantity demanded increases from 10,000 to 20,000. Calculate the price elasticity of demand.

a.1

b. -3

c. 0

d. 1/3=0.33

3.Refer to the accompanying table. The price elasticity of demand of erasers is          when the price is lowered from $1.50 to 1.00. Sellers of erasers will their total revenue from this price.

a. perfectly elastic; not change

b. elastic; raise

c. Inelastic; raise

d. Inelastic; lower

e. elastic; lower

5.Refer to the following figure to answer the question

In the figure, point A is

a. an inefficient point

b. an efficient point

c. the equilibrium

d. unattainable with current resources

e. the point where society would prefer to consume

e. increase in supply from Q1 to Q2 .

7.Given the production possibilities frontier (PPF) shown in the figure

Given current resources and technology the attainable range is best described as:

a. only area o: points outside the PPF

b. Area o: points outside the PPF and points on the PPF

c. Area I: points inside the PPF and points on the PPF

d. points on the PPF only

e. only area I: points inside the PPF

Explanation / Answer

2.

Correct Answer:

b. -3

Explanation:

Here, Midpoint method is used to calculate elasticity of demand.

Price Elasticity of Demand (E) = % change in demand of IBM computers / % change in their price

E = ((20000 – 10000)/(10000+20000)/2) / ((2000 – 2500)/(2000+2500)/2)

E = -3

Note: Pl. repost other unanswered questions for their proper answers.

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