Price elasticity, Microeconomics

Assignment Help:

The price elasticity ( ε ) of demand for Q has been estimated at -0.5. Current consumption Q* is 70 units and market price (P*) is 0.70.

a. Fit a linear demand curve to the observed market data. Illustrate your result using a suitably labelled diagram. Hint: ε - = b(P*/Q*)and the equation for a linear demand function is Q* = a-bP*.

b. Now assume that the price of Q increases to P* = 0.80. Using your estimated demand function, calculate the change in consumer surplus arising from the price increase. Illustrate your result.


Related Discussions:- Price elasticity

Boltzmann distribution, Boltzmann Distribution: In most cases of interest o...

Boltzmann Distribution: In most cases of interest of chemistry the particles adopt the Boltzmann distribution. Qualitative considerations: the general expression for W given by eq

Data manipulation, Data were taken with a Data Acquisition System (DAQ) and...

Data were taken with a Data Acquisition System (DAQ) and stored in the data file 'data.txt'. 'data.txt' is a text file with 3 columns containing the following data: Column 1: Ti

Explain how a perfact market responds to changes in consumer, explain how a...

explain how a perfact market responds to changes in consumer demand?

Determinants of private demand - ability to pay, Determinants of Private De...

Determinants of Private Demand - Ability to Pay In a developing country like India, of all the factors determining investments in education, the most important factor is the ‘

Explain the economic principle, Various studies have concluded that the dem...

Various studies have concluded that the demand for movie cinema attendance is responsive to advertising.  A study of one company, with movie cinemas in three neighbouring towns, sh

National budget, National Budget: A National Budget is a document show...

National Budget: A National Budget is a document showing estimates of expected government revenue and intended expenditure for the coming financial year. It usually consist of

Externalities, What are corrective taxes? Why do economists prefer them to ...

What are corrective taxes? Why do economists prefer them to regulations as a way to protect the environment from pollution. Discuss

International trade, discuss the methods used by the malaysian government t...

discuss the methods used by the malaysian government to slow down import growth.

What are the three basic economic questions, What are the "three basic econ...

What are the "three basic economic questions" that economists often address when examining how much economic output is formed? The three basic questions are: a) what is prod

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd