Assignment 3:ECO 202 Assignment 3: Questions & Answers:Latest Updated A+ Score Guide

ECO 202 Assignment 3: Questions & Answers

Part A – Calculation Questions (8 Questions)
1. The price of a good falls from $50 to $40, and quantity demanded
increases from 200 to 260 units. Using the midpoint formula, calculate the
price elasticity of demand.


Answer: 1.22 (Elastic)


2. Price increases from $8 to $10 and quantity demanded falls from
500 to 425. Calculate elasticity using the midpoint method.


Answer: 0.8 (Inelastic)


3. If elasticity = 2.5 and price decreases by 12%, by how much does
quantity demanded change?

Answer: 30% increase


4. If elasticity = 0.4 and price rises by 15%, how much does quantity
demanded change?


Answer: 6% decrease


5. A firm’s total revenue increases when price rises from $20 to $22.
What does this imply about elasticity?
Answer: Demand is inelastic

, 6. Quantity rises from 1,000 to 1,400 when price falls from $5 to $4.
Calculate elasticity using midpoint method.


Answer: 1.5 (Elastic)


7. A linear demand passes through (P=10, Q=0) and (P=0, Q=100).
What is elasticity at P=5?


Answer: 1 (Unit elastic)


8. If elasticity = 3 and total revenue is $10,000 at price $100, what
happens to revenue if price decreases?


Answer: Revenue increases


Part B – Fill in the Blank (12 Questions)
9. Elasticity is calculated as %ΔQ divided by __________.
Answer: %ΔP


10. If elasticity is greater than 1, demand is called
__________.


Answer: Elastic


11. If elasticity is less than 1, demand is called
__________.


Answer: Inelastic