ECON 202, Principles of Microeconomics
Homework Assignment #1
Please answer all questions, and submit your assignment via the blackboard. This assignment carries 52 points.
1. Moving along a demand curve, quantity demanded decreases 21 percent when price increases
by 7 percent.
a. The price elasticity of demand elasticity is calculated to be ____________.
b. Given the price elasticity calculated in part a, demand is ______________. (elastic, inelastic, unitary elastic) along this portion of the demand curve.
c. For this interval of demand, the percentage change in quantity is _____________ (greater than, less than, equal to) the percentage change in price.
2. Fill in the blanks:
a. The price elasticity of demand for a firm’s product is equal to 0.5 over the range of prices being considered by the firm’s manager. If the manager decreases the price of the product by 12 percent, the manager predicts the quantity demanded will _____________ (increase, decrease) by ______ percent.
b. The price elasticity of demand for an industry’s demand curve is equal to 0.5 for the range of prices over which supply increases. If total industry output is expected to increase by 6 percent as a result of the supply increase, managers in this industry should expect the market price of the good to _____________ (increase, decrease) by ______ percent.
3. The price elasticity of demand for a firm's product is 2.25 over the range of prices being
considered by the firm's manager.
a. If the manager increases the price of the product by 8 percent, the manager predicts that quantity demanded will _____________ by _______ percent.
b. If the manager wishes to increase sales by 25 percent, the manager predicts the price of the product must be _____________ by _______ percent.
4. Boeing estimates the elasticity of demand for new commercial jets is 1.25. State whether the following statements are either true or false.
a. "The price effect dominates the quantity effect." _________ (true, false)
b. "A 4 percent increase in the number of jets sold will require a 5 percent decrease in the price of jets." ________ (true, false)
c. "A 5 percent decrease in the price of jets will increase Boeing's total revenue." ______.
5. Use the information provided in the diagram below to fill in the blank spaces. When the price of good
Xis $75, calculate the following elasticities:
a. Panel A shows how the demand for X shifts when income (M) increases from $33,000 to $35,000. The income elasticity of demand for X equals _____________. Good X is a(an) _________________ good.
b. Panel B shows how the demand for X shifts when the price of related good Y decreases from $80 to $60. The crossprice elasticity equals _____________. Goods X and Y are ________________. [use the midpoint approach in answering a & b]
6. Using the supply data in the schedule shown below, complete the table by computing the price elasticity of supply coefficients between each set of prices. Indicate whether supply is elastic, inelastic or unitary at each set of prices. (Use the midpoint formula)
Price 
Quantity supplied 
Elasticity coefficient 
Character of supply 
$11 
130 




_____ 
_____ 
9 
110 




_____ 
_____ 
7 
90 




_____ 
_____ 
5 
70 




_____ 
_____ 
3 
50 


Subject  Mathematics 
Due By (Pacific Time)  10/13/2013 12:00 am 
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