What is Law of Demand? Describe the Assumptions of Law of Demand. Draw the Demand curve for the following schedule; (2.5) Price of Utility Software ($) Quantity of Utility Software Demanded 00 00 50 100 100 80 150 60 200 40 250 20 300
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- 2. Draw a supply and demand curve for the iPhone 8. Apple announces that the iPhone X(Max) is coming out in 1 year, what happens to the supply and demand for iPhone 8s? Why?5. Choosing demand elasticity on a graph Consider the demand for a luxury good such as a yacht. You can plot three different straight lines through the three points X, Y, and Z on this graph. Place the blue line (circle symbol) so that it goes through two of the points and shows the most likely demand curve for this type of good. Hint: Consider the relative elasticities of the different possible demand curves. 120 100 Demand Curve 80 60 40 20 4 10 12 14 16 LUXURY GOODS (Thousands per year) PRICE (Dollars per yacht)1. Define utility, Marginal utility explain the law of diminishing marginal utility with the help of graph. Also explain its assumption2. Define price elasticity of demand how we calculate price elasticity of demand what are the categories of price elasticity of demand explain with formula and graph 3. Define and Explain and draw on graph1. total cost2. total variable cost3. total fixed cost4. marginal cost5. average fixed cost 6. average variable cost7. average total cost
- 6. Determinants of price elasticity of demand Consider some determinants of the price elasticity of demand: The availability of substitutes • The market used to measure demand • The share of budget spent on the product • The time horizon being considered A good without any close substitutes is likely to have relatively the price of the good rises. The price elasticity of demand for a good also depends on how broadly the good is defined. Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have a demand elasticity that falls in between. Categories Most Elastic In Between Least Elastic Beverages Wine Merlot demand, because consumers cannot easily switch to a substitute good if Price elasticity for a good also depends on the share of a consumer's budget spent on a good. Other things being equal, which of the following goods has the most elastic demand? TV and Internet…6. Law of Demand 2 Suppose that your demand schedule for pizza is as follows: Price (Dollars) 8 10 12 14 16 Quantity of Pizzas Demanded (Income = $20,000) 40 32 24 16 8 Quantity of Pizzas Demanded (Income = $24,000) 50 45 If the price of a pizza is $10, your income elasticity of demand is of a pizza is $14, your income elasticity is 30 20 12 Using the midpoint method, your price elasticity of demand as the price of pizzas increases from $10 to $12 is and if your income is $24,000. if your income is $20,000 as your income increases from $20,000 to $24,000. However, if the price7. Which of the following statements is (are) correct? (x) If the coefficient of price elasticity of demand has a value of 1, then the absolute value of the percentage change in price equals the absolute value of the percentage change in quantity demanded. (y) The coefficient of price elasticity of demand for a vertical demand curve equals zero because the quantity demanded does not change as the price changes. (z) The midpoint method is used to compute elasticity because it gives the same answer regardless of the direction of change A. (x), (y) and (z) В. (x) and (y) only C (x) and (z) only D (y) and (z) only E. (z) only
- 4-5B Draw the price effect and the quantity effect for a price change from $60 to $70. Which effect is larger? Does total revenue increase or decrease? No calculation is necessary. 2. Draw the price effect and the quantity effect for a price change from $10 to $20. Which effect is more significant? Does total revenue increase or decrease? No calculation is necessary.2. ENUMERATE SOME COMPARISONS AND CONTRASTS OF THE CONCEPT OF DEMAND AND CONCEPT OF SUPPLY. Give 5 each5. Law of Demand Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston: Price Quantity Demanded by Business Travelers Quantity Demanded by Vacationers (Dollars) (Tickets) (Tickets) 150 2,100 1,000 200 2,000 800 250 1,900 600 300 1,800 400 As the price of tickets rises from $150 to $200, the price elasticity of demand for business travelers is and the price elasticity of demand for vacationers is , using the midpoint method. Therefore, the demand for airline tickets in this price range is v elastic for vacationers because business travelers are v sensitive to changes in price.
- 5. Law of Demand Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston: Price Quantity Demanded by Business Travelers Quantity Demanded by Vacationers (Dollars) (Tickets) (Tickets) 150 2,100 1,000 200 2,000 800 250 1,900 600 300 1,800 400 As the price of tickets rises from $250 to $300, the price elasticity of demand for business travelers is and the price elasticity of demand for vacationers is ▼ , using the midpoint method. Therefore, the demand for airline tickets in this price range is elastic for vacationers because business travelers are sensitive to changes in price.1. Determinants of the price elasticity of demand (2nd) Consider some determinants of the price elasticity of demand: • The availability of close substitutes • Whether the good is a necessity or a luxury • How broadly you define the market • The time horizon being considered A good with many close substitutes is likely to have relatively demand, since consumers can easily choose to purchase one of the close substitutes if the price of the good rises. A good’s price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the same, which one has the least elastic demand? Yacht Chemotherapy for cancer patients The price elasticity of demand for a good also depends on how you define the good. Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and…Along demand curve Do,what is the quantity demanded when the price is $8? 10 8 4 Do D2 10 30 40 50 Quantity (gaming apps) 04 O 10 Price ($) 20
