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Module 3 Assignment Part 1

1. The document provides 4 questions analyzing demand functions and calculating own price and cross price elasticities. It gives the demand functions, price values for goods X and Y, and quantity demanded to calculate the elasticities. 2. The second part provides 4 additional questions analyzing a demand table, including identifying price and quantity points on the demand curve and calculating total revenue. 3. The questions assess understanding of demand functions, elasticity calculations, and using demand curves to determine price, quantity, and revenue from given information.

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JunmirMalicVillanueva
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2K views

Module 3 Assignment Part 1

1. The document provides 4 questions analyzing demand functions and calculating own price and cross price elasticities. It gives the demand functions, price values for goods X and Y, and quantity demanded to calculate the elasticities. 2. The second part provides 4 additional questions analyzing a demand table, including identifying price and quantity points on the demand curve and calculating total revenue. 3. The questions assess understanding of demand functions, elasticity calculations, and using demand curves to determine price, quantity, and revenue from given information.

Uploaded by

JunmirMalicVillanueva
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Module 3 Assignment No.

3
Part 1. Read and Analyze each question carefully and answer the following
questions on the space provided.
1. The demand for good X has been estimated by Q xd = 12 − 3Px + 4Py. Suppose
that good X sells at 2 php per unit and good Y sells for 1 php per unit. Calculate
the own price elasticity.
Given: Px = 2, Py = 1
Qd = 12 – 3(2) + 4(1) = 10
∆ Q Px 2
ε x= ×
∆P Q ( )
=−3
10
=−0.6 Good X is inelastic

∆ Q Py 1
ε =
y × =4 ( )=0.4 Good Y is inelastic
∆P Q 10

2. Suppose Q xd = 10,000 − 2 Px + 3 Py − 4.5M, where Px = 100 php, Py = 50 php,


and M = 2,000 php. Compute for the own price elasticity of demand.
Given: Px = 100, Py = 50, M = 2,000
Qd = 10,000 − 2 (100) + 3 (50) − 4.5 (2,000) = 950
∆ Q Px 100
ε x= ×
∆P Q ( )
=−2
950
=−0.21 Good X is inelastic

∆ Q Py 50
× =3 (
950 )
ε =
y =0.15(rounded up=0.16) Good Y is inelastic
∆P Q

3. Suppose the demand function is Q xd = 100 − 8Px + 6Py – M. If Px = 4 php, Py = 2


php, and M = 10 php, determine the cross-price elasticity of good x with respect to
the price of good y.
Given: Px = 4, Py = 2, M = 10
Qd = 100 – 8 (4) + 6 (2) – 10 = 70
∆ Qx Px 2
ε c= ×
∆ Py Qx
=6 ( )
70
=0.17

4. Suppose the demand function is given by Qxd = 10Px0.9 Py0.5 M0.22 H. Calculate the
cross-price elasticity between goods x and y.
ln Qd = ln 100 + 0.9 ln Px + 0.5 ln Py + 0.22 ln M + ln H
Cross-price elasticity of demand = 0.50 (Coefficient of Py)
X and Y are complements
Part 2. No. 5.
Direction: Read and analyze each question carefully (refer to table 1 to answer the
following questions).
5.1 The demand function in the accompanying table is QXd = 100 − 2PX. Based on
this information, when: QX = 80, the price, PX (point A)?
80 = 100 − 2PX
Point A = 10 php
5.2 The demand function in the accompanying table is QXd = 100 − 2PX. Based on
this information, if Px = 30 php QXd = (point B)?
QXd = 100 – 2(30)
Point B = 40 units
5.3 The demand function in the accompanying table is QXd = 100 − 2PX. Based on
this information, when: compute the own price elasticity of demand when PX = 25
php (point C)?
∆ Q Px 25
ε x= ×
∆P Q
=−2( )
50
=−1

Point C = -1 Good X is Unitary Elastic


5.4 The demand function in the accompanying table is QXd = 100 − 2PX. Compute
the total revenue when QX = 20 (point D)?
Total Revenue = (Px)(Qx) = (40)(20)
Point D = 800 php

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