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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.