Assignment
1.Given that the price elasticity of demand (ϵ) is 0.5,
a.How does demand change if the price is increased 1%
b.How does demand change if the price is decreased 5%
c.How does demand change if the price is decreased 50%
2.The Linear Price-Response Function. The total potential market for mini-jumbo-shrimp is D=150,000. We know that the demand decreases 5000 for every dollar increase in price. We also know that we can use a linear price-response function to approximate the consumer behavior. Find the following:
a.What is the PRF in terms of price p?
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