1.If the price of cigarettes increases, the demand would be: elastic, inelastic,

Question

1.If the price of cigarettes increases, the demand would be: elastic, inelastic, or unitary

2.If Chevron petrol increases in price, then the demand would be: elastic, inelastic, or unitary

3.Suppose E(p)=1/3 when price is $150, demand would be: elastic, inelastic, or unitary

4.find E(p):   x=-(5/6)p+10 , p=6 and is demand  elastic, inelastic, or unitary

5.find E(p): p=425-.02x , p=300 and is demand  elastic, inelastic, or unitary

Suppose a demand function is given by p=350-0.2x. Use this demand function to answer questions 6 – 8

6. Solve the demand function for x . answers: 700-p , 700-5p, 350-p, 175-5p, 1750-5p

7.find E(p) when the price is $150. answers: .5 , 2, .75, 1.5, 1

8.When the price is $150, demand is: elastic, inelastic, or unitary

Explanation / Answer

1. Demand would be inelastic as Cigarettes are habits which are not dropped because of price increase by large number of people i.e. Why absolute value of Change in demand is less.

2.Chevron petrol is veblen good and do not follow law of demand i.e why Demand would be elastic.

3. Inelastic because by defination Inelastic means PED(Price elasticity of demand ) <1.

4 p=6 and x=5 therefore E(p)=dx/dp=5/6 <1 So Inelastic.

5.p=300 and from equation x=62500 therefore E(p)= dx/dp >1 So Elastic.

6.as p=350-0.2x than p=350-(2/10)x

now x/5=350-p

so x=1750-5p

7.when p=150 x=1000 (x=1750-150*5) then E(p)=dx/dp=5 answer is 5

8 demand is Elastic.as E(p)>1

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