04 Jun Question Learning activity 5 ch 4-U2
Question
Learning activity 5 ch 4-U2
Continue to read chapter 4 of your text book that deals with demand analysis. All assignments should be answered in English. The following assignments are selected directly from your text book. Remember to show step by step how you obtained your final result. Take into account the due date of these exercises. Submit Assignments as an attachment.
Study in addition the following concepts: Law of diminishing marginal utility, ordinal utility, cardinal utility, marginal utility, characteristics of indifference curves, perfect complements, perfect substitutes, price consumption curve, income consumption curve,. Engle curves, condition for utility maximization
EXERCISE 1
You possess the following information about IPATH. The price elasticity of demand for IPATH is -2.5; The cross price elasticity of demand for IPATH with respect to Laptops is 0.50; the income elasticity for IPATH is 3.0. Evaluate the following questions based on the supplied information.
a. If the price of I PATH were increased by 4%, by what percentage would sales of IPATH change?
b. An increase in the price of IPATH would increase the demand for laptops by 2%
c. Supose that the price of IPATH increases by 5%,at the same time the price of laptops falls by 3% and income elasticity increases by 2%. What combined effect of these changes is expected with respect to sales of IPATH
EXERCISE 2
Price Mart reduces the price of a 42 inch TV Plasma from $1,200 to $1,000. As a result sales of TV Plasmas increased from 30 units a month to 42 units a month. Calculate the price elasticity of demand for TV Plasmas. How could we classify the demand for TV Plasmas?
EXERCISE 3
PRICE MART offered a whopping 10% discount on the average price of TV Plasma for fathers day. Customer response was so enthusiastic that unit sales rose by 15% over the previous month’s level,
a. Calculate the point price elasticity of demand for TV Plasma during the month of the discount.
b. Calculate the profit maximizing price per unit if Price Mart has an average wholesale cost of $350 and incurs marginal selling cost of $100 per unit
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