What happens to the price elasticity of demand on a

Supply, Demand, and Equilibrium

a. List the lowest price at which you would produce each of the listed quantities.

b. Between \$104 and \$106: The % difference in quantity is (difference divided by average) ______ The % difference in Price is (difference/average)_____________________ The elasticity of supply is__________.

c. Between \$100 and \$104? The % difference in quantity is (diff/avg) _________ The % difference in Price is (diff/avg) _______The elasticity of supply is________.

d. As the price you can charge goes from \$104 to \$106, which rises by a larger percentage, the price or the number of units you're willing to produce? ___________ Demand elasticity

2.

a. Data from market surveys and market tests indicates that at \$20 per ticket, you'd get 75 patrons at your comedy club on weekend nights. At \$25, you'd get 65. What is the elasticity of demand over this price range? The % difference in quantity is (diff/avg) ________ The % difference in Price is (diff/avg) ______ The elasticity of demand is __________

b. Due to your success, another comedy club opens up a couple of miles away. As a result what happens to the demand for your product?

c. What happens to the price elasticity of demand? ______ On a particular night, you have a big name headliner. It's a once-in-a-lifetime opportunity to see this big a name in your town.

d. Is demand for tickets to that show higher or lower than on a regular night?_____________________ e. Is demand more or less elastic than on a regular night?

3. You have a website which allows visitors to quickly create slideshows with audio using pictures they find on the internet .(for now, let's not think about the copyright implications) You also sell a much more robust and powerful program with many more features as a download. It is reasonable to assume that people will use the free website instead of buying the program. It is also reasonable to assume that people who like the free site for quick, simple projects, would use the paid version when they need a more sophisticated product and are willing to put the time into creating it. You are very interested in which of these two possibilities is the more common.

a. You find that after you raise the price of the paid version from \$20 to \$23, the number of users on the free site goes from 1000/day to 1150/day. What is the cross-price elasticity of these two goods? The % difference in quantity is (diff/avg) ________The % difference in Price is(diff/avg) _________ The income elasticity of demand is________.

b. Are they substitutes or complements?

c. If users of the free site had gone from 1000 to 850, would you conclude that they are substitutes or complements.

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