managerial econ and business

Question

1.A firm's demand curve is estimated to be Q = 400 - 3P, where Q is quantity and P is the price of the good. At P = $21, the point elasticity of demand is _____.



2.A firm's demand equation is given by: Q = 60 - 60P + 2Y, where Q is quantity, P is price, and Y is income. If price increases by $2 and income increases by $67, then quantity demanded will change by ___ units.

3.A product's point price elasticity has been estimated at -1.5. At the initial price of $28.2, the quantity demanded was 10 units. If the firm cuts the price to $17.5, quantity demanded and sold is expected to increase by _____ percent.

Hint: Round your answer to two decimal places. The answer is a percent between 0 -100 where you would write 10% and not .10.

Answer 1

at a price of 21 q- 400-63 = 337. e = -3(21/337) =-.187

for 2) increasing price by $2 reduces quantity demanded by 60*2 or 120. Increasing income by 67 increases quantity demanded by 2*67 or 134. The net is 134-120 or +14

For 3) the percent change in price =(17.5-28.2)/28.2 = -37.94% the percent change in quantity demanded will be -1.5 times that or q increases by 56.9%