Edexcel Igcse Economics Answer

b. For problems #1 and #2 there were no profitable alternatives to understocking, whereas in problem #3, Ralph has a profitable alternative for understocking since 40% of customers will buy the Private. The different critical ratios from each problem produce a different optimal stocking quantity.

#5. Other things equal, what effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output.

b. Determine the two product numbers with the largest total dollar sales for subsequent follow-up to verify the selling prices and quantities shipped.

3. The price elasticity of demand increases with the length of the period considered simply because ( )

d. Calculate the price elasticity of demand in each market and discuss these in relation to the prices to be charged in each market.

Answer: Leah was willing to pay $100 and the sweater cost $80, so she keeps the difference, or $20, as

C. Small number of firms, price maker, limited entry and exit, and a standardized product

more. The more that item is produced the more the people will spend which increasing the

The stocking quantity and expected profits are higher in the second scenario because of the extra time spent to improve the quality of profile section. By spending the extra time to improve the profile section, Anna Sheen increased the overall quality of her newspaper, which will, most likely, lead to an increased probability of demand for her newspaper around the area. This increased demand will raise Anna Sheen’s stocking quantity and the daily expected profits that are associated with that individual stocking quantity.

a.) Draw and properly label the demand and supply graphs (this means you must label the axes and any lines you include on the graph).

9. If the demand for a good is perfectly price inelastic in the short run and the supply curve is upward sloping, imposing a sales tax on the good will

At the current prices, firms may sell as much product as they want, thereby maximizing profits.

Elasticity of demand represented as “Ed” is defined as a “measure of the response of a consumer to a change in price on the quantity demanded of a good” (McConnell, 2012). Determinants for elasticity of demand would include the substitutability of a good, proportion of a consumer 's income spent on a good, the nature of the necessity of a good and the time a purchase is under consideration by the consumer. Furthermore, elasticity of demand is calculated with this formula:

have more “pricing power” than when demand is much weaker and falling (e.g. during a recession).

d. a price that includes both the cost of the product plus transportation to the buyer