Intermediate Microeconomics - Assignment Example

Elasti of Demand Assignment Own price elasti Point elasti of demand: EpD = %change in QD/%change in P. = {(7-10)/10}/ {(1.25-1)/1} = (-3/10)/ (0.25/1) = -0.3/0.25 = -1.2. Arc elasticity of demand is the proportion of the percentage of variable between two points to the percent of the other variable (Mankiw 89). {(Q2-Q1)/ (Q1+Q2)/2}/ {(p2-p1)/ (p1+p2)/2} = {(7-10)/ (10+7)/2}/ {(1.25-1)/ (1.25+1)/2} = (-3/8.5)/ (0.25/1.125) = -0.353/0.222 = -1.59.2. Cross price elasticity of demandCross elasticity of demand measures the responsiveness of the demand for the product in respect to change in price of another product.

It depicts the percentage change in price of the product due to the percentage in price of a complement product (Mankiw 92). EX, Y = % change in quantity demanded of a product X/ % change in price of product Y. = {(400+450)/ (5+4)}* (4-5)/ (450-400) = (850/9)*(-1/50) = 94.44/-0.02 = -4.722. The negative coefficient depicts an increase in price of computer will result to 4.72 percentages in decrease in demand for printers. 3. Income elasticity of demandIncome elasticity of demand assesses the "sensitivity of the demand for a good to a change in the income of the consumers" (Mankiw 97).

Ed = (A1+A2)/ (Q1+Q2)*(change in Q/change in A) = (10,000+15,000)/ (20+18)* (18-20)/ (15,000-10,000) = (25,000/38)*(-2/5,000) = (657.89*0.0004) = -0.263. As the consumers income increases the demand of the commodity decrease even though the price remains the same. This implies the goods are of inferior quality thus when income increases consumers opt for better quality products (Mankiw 109). 4. Regression of quantity demanded and log of independent variables.’Regressing the logs of independent variables Px, Py and I results to a linear function of the amount needed and the independent variables (Mankiw 123).

The percent change in quantity demanded is determined by the coefficient of the income I, price of the product X and price of the product Y.Works CitedMankiw, Gregory, N. “Principles of Economics, 6th Ed.” USA: Cengage Learning, (2011): 89-132.