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Assignment 03a

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48 views2 pages

Assignment 03a

Uploaded by

120605230062
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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SAIGON INTERNATIONAL SCHOOL OF BUSINESS

The collaborative training programme


Between Banking University Ho Chi Minh city and the University
of Bolton (United Kingdom)

MODULE TITLE: PRINCIPLES OF ECONOMICS


ASSIGNMENT No.3

DATE OF SUBMISSION: The seventh Lecture Day

QUESTIONS AND PROBLEMS

1. Suppose that business travelers and vacationers have the following demand for airline tickets
from New York to Boston:

Price Quantity demanded Quantity demanded


(Business travelers) (Vacationers)
$150 2,100 tickets 1,000 tickets
200 2,000 800
250 1,900 600
300 1,800 400
a. As the price of tickets rises from $200 to $250, what is the price elasticity of demand for (i)
business travelers and (ii) vacationers? (Use the midpoint method in your calculations).
b. Why might vacationers have a different elasticity from business travelers?

2. Suppose that your demand schedule for DVDs is as follows:

Price Quantity demanded Quantity demanded


(Income = $10,000) (Income = $12,000)
$8 40 DVDs 50 DVDs
10 32 45
12 24 30
14 16 20
16 8 12

a. Use the midpoint method to calculate your price elasticity of demand as the price of DVDs
increases from $8 to $10 if (i) your income is $10,000 and (ii) your income is $12,000.
b. Calculate your income elasticity of demand as your income increases from $10,000 to
$12,000 if (i) the price is $12 and (ii) the price is $16.
3. For each of the following pairs of goods, which good would you expect to have more elastic
demand and why?
a. Required textbooks or mystery novels;
Le T. Nhan Principles of Economics
b. Beethoven recordings or classical music recordings in general;
c. Subway rides during the next six months or subway rides during the next five years;
d. Root beer or water.

MULTIPLE CHOICE

No. QUESTION CONTENTS ANSWER


1 A life‐saving medicine without any close substitutes will tend to have
a. A small elasticity of demand
b. A large elasticity of demand;
c. A small elasticity of supply;
d. A large elasticity of supply.
2 The price of a good rises from $8 to $12, and the quantity demanded falls from 110
to 90 units. Calculated with the midpoint method, the elasticity is:
a. 1/5;
b. ½;
c. 2;
d. 5.
3 A linear, downward‐sloping demand curve is:
a. Inelastic;
b. Unit elastic;
c. Elastic;
d. Inelastic at some points; and elastic at others.
4 The ability of firms to enter and exit a market over time means that, in the long run,
a. The demand curve is more elastic;
b. The demand curve is less elastic;
c. The supply curve is more elastic;
d. The supply curve is less elastic.
5 The price of coffee rose sharply last month, while the quantity sold remained the
same. Each of five people suggests an explanation:
TOM: demand increased, but supply was perfectly inelastic;
DICK: Demand increased, but it was perfectly inelastic;
HARRY: demand increased, but supply decreased at the same time;
LARRY: supply decreased, but demand was unit elastic;
MARY: supply decreased, but demand was perfectly inelastic.
Who would possibly be right?
a. Tom, Dick, and Harry;
b. Tom, Dick, and Mary;
c. Tom, Harry, and Mary;
d. Dick, Harry, and Larry

FINISH

Le T. Nhan Principles of Economics

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