Learning Process

Topics: Supply and demand, Honda Civic, Price elasticity of demand Pages: 2 (285 words) Published: January 20, 2013
Q. 1. The accompanying table gives part of the Supply schedule for personal computers in United States.

Price of Computer($)Quantity of computer supplied

a)Calculate the Price elasticity of supply(PES) when the price increases from $900 to $1100 b)Suppose firms produce 1000 more computers at any given price due to improved technology. As the price increases from$900 to $1100, is the PES now greater than, less than or the same as it was in part(a)

Q2. According to a Honda press release on October 232006 sales to the fuel-efficient four –cylinder Honda Civic rose by 7.1% from 2005 t0 2006. Over the same period, according to data from the U.S Energy Information Administration, the average price of regular gasoline rose from $2.27 per gallon to $ 2.57 per gallon.

a)Calculate the cross elasticity of demand (XED) between Honda Civics and regular gasoline

b)Explain the relationship above in terms of XED

Q3. Amazon.com. the online bookseller wants to increase total revenue (TR). One strategy is to offer a 10% discount on every book it sells. Amazon.com knows what’s that its customers can be divided Into two distinct groups according to their likely responses to the discount. The accompanying table show how the two groups respond to the discount.

Group A
(Sales Per week)in millionGroup B
(Sales Per week) in million
Volume of the sales before the 10% discount1.55 1.50
Volume of the sales after then10% discount1.651.70
a.Calculate the PED of group A & B.
b.Explain how the discount will affect Total Revenue from each group. Explain your answer.
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