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Price and Quantity Effects

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Price ; Quantity Demanded
$200 ; 1000
$150 ; 1400
$100 ; 1800

If price falls from $200 to $150, what is the elasticity of demand over this range?
A. -0.625
B. -1.0
C. -1.17
D. -2.5
E. -3.0

As output increases from 1,000 to 1,400 what is marginal revenue?
A. $25
B. $50
C. -$400
D. -$25
E. -$75

If price falls from $200 to $150,
A. Arrows representing the price and quantity effects both point down.
B. An arrow representing the price effect points down and is longer than an arrow for the quantity effect.
C. An arrow representing the price effect points down and is shorter than an arrow for the quantity effect.
D. Arrows representing the price and quantity effects both point up.
E. Total revenue moves in the same direction as the arrow representing the price effect.

If price falls from $150 to $100, what is the elasticity of demand over this range?
A. -0.625
B. -1.0
C. -1.17
D. -2.5
E. -3.0

As output rises from 1,400 to 1,800, what is marginal revenue?
A. $25
B. $50
C. -$400
D. -$50
E. -$75

If price falls from $200 to $150,
A. Arrows representing the price and quantity effects both point down.
B. An arrow representing the price effect points down and is longer than an arrow for the quantity effect.
C. An arrow representing the quantity effect points up and is shorter than an arrow for the price effect.
D. Arrows representing the price and quantity effects both point up.
E. Total revenue moves in the same direction as the arrow representing the quantity effect.

If price falls from $150 to $100,
A. Arrows representing the price and quantity effects both point down.
B. An arrow representing the price effect points down and is shorter than an arrow for the quantity effect.
C. Total revenue moves in the same direction as the arrow representing the price effect.
D. The arrow representing the price effect points down and the arrow representing the quantity effect points up.
E. Both c and d

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Solution Summary

There are 7 problems. Solutions to these problems provide methodology to calculate price elasticity of demand. Quantity effect and price effects are also discussed in the given cases.

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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