Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Textbook Question
Chapter 19, Problem 4E
Suppose there are two types of e-book consumers: 100 “standard” consumers with demand Q = 20 − P and 100 “rule of thumb” consumers who buy 10 e-books only if the
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16. Elasticity of a Linear Demand Curve
Suppose that the market demand for widgets is linear:
QD = a - bP
a. Derive a formula for the point elasticity of demand as a function of price (P).
ED
b. Find a simple expression for ED at each of the following points (label points in diagram):
P = a/b
(vertical intercept)
%D
P = 3a/4b
%3D
P = a/2b (midpoint)
%3D
%3D
P = a/4b
ED =
%3D
(horizontal intercept)
ED =
If Neil's elasticity of demand for hot dogs is constantly 0.9, and he buys 4 hot dogs when the price is $1.50 per hot dog, how many will he buy when the price is $1.00 per hot dog?
This time, we are using elasticity to find quantity, instead of the other way around. We will use the same formula, plug in what we know, and solve from there.
Q1
Chapter 19 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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- Suppose a straight-line downward-sloping demand curve shifts rightward. Is the price elasticity of demand higher, lower, or the same between any two prices on the new (higher) demand curve than on the old (lower) demand curve?arrow_forward(Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of Si per unit. A reduction in price to $0.20 results in an increase in quantity demanded to 70 units. Using the midpoint formula, show that these data yield a price elasticity of 0.25. By what percentage would a 10 percent rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve?arrow_forwardEstimates presented in Exhibit 5 show that Android users have a higher price elasticity of demand for apps in the Google Play Store than do iPhone users in the Apple App Store. Why might Android users tend to be more sensitive to app prices than iPhone users? What categories or types of apps (for example, games/social media) do you think have the highest price elasticities?arrow_forward
- If the midpoint on a straight-line demand curve is at a price of $7, what can we say about the elasticity of demand for a price change from $12 to $10? What about from $6 to $4?arrow_forwardProve that price elasticity of demand is not the same as the slope of a demand curve.arrow_forwardEvaluate the following statement: Along a downward-sloping linear demand curve, the slope and therefore the elasticity of demand are both 'constant.arrow_forward
- Suppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a. Calculate the price elasticity of demand between 90 and 110. b. Is the price elasticity of demand between 90 and 110 elastic, unit elastic, or inelastic? c. Will Erins total revenue rise if she increases the price from 90 to 110? d. Calculate the price elasticity of demand between 110 and 130. e. Is the price elasticity of demand between 110 and 130 elastic, unit elastic, or inelastic? f. Will Erins total revenue rise if she increases the price from 110 to 130?arrow_forwardSuppose a movie theater determines it can charge different prices to patrons who go to weekday matinees and people who attend evening and weekend shows. The movie theater's goal is to increase total revenue. See Hint The price elasticity of demand for weekend and evening patrons is -0.50, and the price elasticity of demand for matinee moviegoers is -2.80. Based on the price elasticity of demand for each group of people, how should the movie theater adjust its prices? Choose one: O A. Raise the price for matinee moviegoers, and keep the price the same for weekend and evening patrons. O B. Lower the price for matinee moviegoers, and raise the price for weekend and evening patrons. O C. Lower the price for matinee moviegoers, and keep the price the same for weekend and evening patrons. O D. Raise the price for matinee moviegoers, and lower the price for weekend and evening patrons.arrow_forwardThe demand function for leather laptop cases is Qd =100 − P1+0.75 P2+.0075 I . P1= price of leather cases , P2= price of carboncases, I = income. Where P1=10 , P2=20 , I =10,000 Compute for the cross price elasticity. What does your answer imply about the relationship between leather and carbon cases. Compute for the income elasticity of demand. What kind of good is leather laptop cases based from your answer.arrow_forward
- Refer to the table below to answer the questions. Use the mid-point formula. $4 10 B 9. 7 6 Demand 1 2 3 4 5 Q Number of gardenburgers 4.1) If the price of a gardenburger increases from RM8 to RM10, the price elasticity of demand equals 4.2) If the price of a gardenburger increases from RM6 to RM8, the price elasticity of demand equals 4.3) If the price of a gardenburger decreases from RM7 to RM6, the price elasticity of demand equals 4.4) If the price of a gardenburger decreases from RM9 to RM8, the price elasticity of demand equals 4.5) If the price of a gardenburger decreases from RM8 to RM7, the price elasticity of demand equals 4.6) If the price of a gardenburger increases from RM7 to RM9, the price elasticity of demand equals and demand is and demand is and the decrease results in a(n) in total revenue. and demand is and demand is and the increase results in a(n) in total revenue. Price 00arrow_forwardRefer to the table below to answer the questions. Use the mid-point formula. $4 A 10 B 9. C 8 7 F Demand 1 2 3 4 5 Q Number of gardenburgers 4.1) If the price of a gardenburger increases from RM8 to RM10, the price elasticity of demand equals 4.2) If the price of a gardenburger increases from RM6 to RM8, the price elasticity of demand equals 4.3) If the price of a gardenburger decreases from RM7 to RM6, the price elasticity of demand equals 4.4) If the price of a gardenburger decreases from RM9 to RM8, the price elasticity of demand equals 4.5) If the price of a gardenburger decreases from RM8 to RM7, the price elasticity of demand equals 4.6) If the price of a gardenburger increases from RM7 to RM9, the price elasticity of demand equals and demand is and demand is and the decrease results in a(n) in total revenue. and demand is and demand is and the increase results in a(n) in total revenue. Pricearrow_forward10. Comics The demand curve for original Iguanawoman comics is given by (400 – p)² (0arrow_forwardarrow_back_iosSEE MORE QUESTIONSarrow_forward_ios
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