Project #83127 - Microeconomics help

Answer the following three questions to the best of your ability.

  1. Mathematical Exercise: Consider the following demand curve for apples.

    Price (in dollars) Quantity (in Bushels)
    10 1
    9 2
    8 3
    7 4
    6 5
    5 6
    4 7

    a) Find the price elasticity of demand between the prices $8 and $9. Is the demand curve elastic at this point? If so, why? If not, why not? What happens to revenue if the price falls from $10 to $9? Why?
    b) Repeat (a) when the prices are between $5 and $4.

  2. Descriptive Exercise: Consider the following pairs of goods. Discuss which of them has a higher (in absolute value) elasticity and why.
    a) Oil in the short run versus oil in the long run.
    b) Food (as a whole product) versus vacations.
    c) Harry Potter novels versus other fantasy novels.
    d) Medicine versus chewing gum.

  3. Graphical and Mathematical Exercise: Consider a person A, who is extremely thirsty. His maximum willingness to pay chart is given below.

    Glasses of water Maximum willingness to pay
    1st glass $10
    2st glass $6
    3st glass $3
    4st glass $1

    From his fifth glass onwards, A is not willing to pay any money.

    a) Construct A’s demand curve from the above information. (Put the # of glasses demanded on the x-axis, and the price of a glass of water on the y-axis.)
    b) Suppose the price charged for a glass of water is $4/glass. How many glasses will A buy? Calculate (and show in a graph) A’s consumer surplus from this transaction.

Subject Business
Due By (Pacific Time) 09/23/2015 12:00 pm
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