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Intermediate Microeconomics - Assignment Example

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= {(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)…
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Intermediate Microeconomics
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Intermediate Microeconomics

Download file to see previous pages... 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.
Income 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).
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 ...Download file to see next pagesRead More
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