п»їProblem Set 3

Trouble Set 3 is to be accomplished by 11: 59 s. m. (ET) on Monday of Module/Week 6.

1 . Data intended for the market for graham crackers is proven below. Compute the suppleness of demand between the subsequent prices. Cost of crackers

Quantity Demanded (per month)

\$3

80

\$2. a few

120

\$2

160

\$1. 5

two hundred

\$1

240

\$1. 00 - \$1. 50: Flexibility of require equals. forty-five; favoring inelasticity \$1. 50 - \$2. 00: Flexibility of demand equals. 80; favoring inelasticity \$2. 00 - \$2. 50: Suppleness of demand equals 1 ) 29; favoring elasticity \$2. 50 - \$3. 00: Elasticity of demand equates to 2 . two; favoring firmness

If the price of graham crackers is usually \$2. 55 should firms raise or perhaps lower their particular prices if perhaps they want to increase revenue? Clarify this regarding elasticity.

The firm ought to lower all their prices 40 cents so that they can raise profits. The flexibility of require from 2 . 50-2. 00 is 1 ) 29, which means with a lowering of prices there is an stretchy effect on variety demanded. The ideal profit can be reached at the price of \$2 because of the increased sought after with the selling price reduction.

2 . Assume the competitive market shown beneath faces a quick run value of \$10. Using the chart below, determine the following:

Earnings maximizing end result: 110

Approx . mark up over expense: \$2 per unit

Over time, the price comes to \$7. 50. How come this happen?

An increase in demand would temporarily increase the selling price of the good at the short run. This would briefly increase income, making financial profit and welcoming even more firms in to the market. As time passes, the price could settle back off to its original selling price, maintaining their increase in volume supplied, as a result of increase in supply with new firms getting into the market.

What is the modern profit increasing output? 90

3. A nearby hardware store is attempting to decide if to stay wide open. They have identified that all their industry is very competitive and profits have shrunk noticeably....