Question

Help with Price Elasticity of Demand. I will fan and Reward Medals.

Answer 1

What's your question?

Answer 2

Hold on one second i will send a photo

Answer 3

those are the two questions

Answer 4

ok one sec

Answer 5

part b seems a lot easier than a, so let's do that first

Answer 6

ok

Answer 7

At point S, the price is $100, so P = 100
The intercept of the tangent line at S is 300, so A = 300


E = P/(P-A)

E = 100/(100-300)

E = -0.5

Answer 8

Okay I see where I went wrong however I am really confused with a. I tried solving for S but confused with the graph

Answer 9

I'm not sure how to do A since I'm not sure how to compute the change in Q or P

Answer 10

are we including point R?

Answer 11

This is what I got for a.90/300 * 100/60 = 0.5 but not sure if I am using the correct formula

Answer 12

no I have to work R for question d.

Answer 13

oh so you're just computing the slope of the tangent line at S to get 90/300

Answer 14

the slope is negative though

Answer 15

is that for a. ?

Answer 16

no what you have for A is correct except that the slope is negative

Answer 17

Oh ok so we are working on B ?

Answer 18

we already did B

Answer 19

ok , sorry LOL

Answer 20

that's ok lol

Answer 21

same idea as last time, but now you're focusing on R

Answer 22

Yes so how will i work through this one ?

Answer 23

for point R, what did you get when you used P/(P-A)

Answer 24

700/(700-400) , right? I'm not very sure

Answer 25

P = 400 (look at where the horizontal line crosses at 400 for R)

Answer 26

A = 700

this is the y-intercept of the tangent at R

Answer 27

so my answer is backwards ?

Answer 28

yeah you have the values swapped

Answer 29

400/(700-400) ?

Answer 30

correct

Answer 31

actually wait

Answer 32

E = P/(P-A)

E = 400/(400-700)

E = ???

Answer 33

-0.75 ?

Answer 34

no

Answer 35

is it positive ?

Answer 36

no the elasticity of demand is always negative

Answer 37

why? because positive changes in price cause a negative change in demand

price goes up
demand goes down
they combine to tell us that the elasticity of demand is always negative

Answer 38

I'm not sure

Answer 39

you just compute 400/(400-700)

Answer 40

okay so working the parenthesis first give me - 300 /400 = -.75 I keep getting this answer

Answer 41

you're dividing in the wrong order

Answer 42

400/400 ?

Answer 43

no

Answer 44

- 1.3 i have this now

Answer 45

better

400/(400-700) = -1.33333333333333

Answer 46

ahh i see , so the correct answer i include the repeating 3s

Answer 47

yeah or say it's approximately -1.333

Answer 48

something like that

Answer 49

Omg i see so for part d what method did i use to compute it ?

Answer 50

E = P/(P-A)

Answer 51

One last question , then i ill let you go :D

Compare the elasticities in parts a and b. Are they equal? Should they be equal?

Answer 52

they are equal, but I don't know if they are always equal or if it's just a coincidence they are equal

Answer 53

Thank you so much you were very helpful :)

Answer 54

you're welcome