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1)Assume we have currently 120 units demanded of X at price 5 kwacha per unit

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1)Assume we have currently 120 units demanded of X at price 5 kwacha per unit. If elasticity of demand (in absolute terms) is 0.5

Calculate new price required for total sales to be increased by 50%.

2)Assume we have currently 120 units demanded of X at price 5 kwacha per unit. If elasticity of demand (in absolute terms) is 2

Calculate the new quantity demanded if price falls to 4 kwacha per unit

3)Suppose GoSports pennant monopoly is broken up and the pennant industry becomes perfectly competitive. We would expect this breakup to result in:

a) generally the same prices

b) more social welfare

c) higher prices

d) lower prices

4)There is a trade-off between the amount of consumption that people can enjoy today and the amount of consumption that they can enjoy in the future because

producers always respond to what consumers want.
consumers do not like to save.
consumers like to both save and spend.
to increase consumption in the future households must save, thus providing funds for investment.
b.Typically a higher saving rate is associated with
higher investment rates and higher rates of growth.
higher investment rates and lower rates of growth.
lower investment rates and higher rates of growth.
lower investment rates and lower rates of growth.
c. Banks and other financial institutions
reduce the risk of borrowing.
eliminate poor business decisions.
focus on long-term projects.
help allocate resources to the most productive investments.

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1)ELASTICITY OF DEMAND IS PERCENTAGE CHANGE IN QUANTITY DUE TO PERCENTAGE CHANGE IN PRICE.SO WE HAVE GIVEN A ELASTICITY OF DEMAND 0.5. SO, PRICE REQUIRED TO INCREASE THE SALE BY 50% IS ZERO.ELASTICITY OF DEMAND IS PERCENTAGE CHANGE IN QUANTITY DUE TO PERCENTAGE CHANGE IN PRICE.SO WE HAVE GIVEN A ELASTICITY OF DEMAND 0.5. SO, PRICE REQUIRED TO INCREASE THE SALE BY 50% IS ZERO.

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The formula for elasticity of demand is:

Elasticity of Demand (Ep)= percentage change in demand ÷ percentage change in demand =( $\Delta$ Q÷ $\Delta$ P ) × (P ÷Q)

where Q is current quantity demanded , P is current price , $\Delta$ Q is change in quantity demanded and $\Delta$ P is change in price

let us take X as new quantity demanded

Ep = ( $\Delta$ Q÷ $\Delta$ P ) × (P ÷Q)

2 =( (X - 120) ÷ (5-4) ) × (5÷ 120)

2 = ( (X- 120)÷1) × (1÷ 24)

2 = (X - 120)÷24

48 = X -120

X = 168

so the new quantity demanded is 168 units.

3) more social welfare

because it comes with the social economy where there is a single

which is called as monopoly.

A.There is a tradeoff as investment activities increases economy's output in the future and hence to increase the consumption in the future household must save.

B.Higher saving rate is assocaited with higher level of investments and higher rates of growth.As in economics, we say Savings = Investment. If people save more, then banks will have more funds to lend for investment

C.Banks help in allocating the resources to the most productive investments, by doing proper cost saving analysis.

1)Assume we have currently 120 units demanded of X at price 5 kwacha per unit

Economics