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Assessment 2

This document contains 5 questions regarding demand curves, elasticity, and the relationship between price, income, and demand for various goods. Question 1 involves calculating price elasticity from demand curves for mini burgers. Question 2 examines price and income elasticity using demand data for readymade shirts. Question 3 analyzes own and cross price elasticities for tobacco products in rural and urban areas. Question 4 calculates income elasticity using demand changes from income changes. Question 5 determines the cross elasticity between tea and coffee using demand changes from one good's price changes.

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42 views

Assessment 2

This document contains 5 questions regarding demand curves, elasticity, and the relationship between price, income, and demand for various goods. Question 1 involves calculating price elasticity from demand curves for mini burgers. Question 2 examines price and income elasticity using demand data for readymade shirts. Question 3 analyzes own and cross price elasticities for tobacco products in rural and urban areas. Question 4 calculates income elasticity using demand changes from income changes. Question 5 determines the cross elasticity between tea and coffee using demand changes from one good's price changes.

Uploaded by

savithri1371969 bhat
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Q 1.

The diagram below depicts the demand curve for “mini burgers” in a nationwide fast-food
market. Use the information in this diagram to answer the questions that follows:

a. What is the price elasticity of demand along the range of the demand curve between
a price of $0.20 per mini burger and a price of $0.40 per mini burger? Is demand elastic
or inelastic over this range?

b. What is the price elasticity of demand along the range of the demand curve between
a price of $0.80 per mini burger and a price of $1.20 per mini burger? Is demand elastic
or inelastic over this range?

c. What is the price elasticity of demand along the range of the demand curve between
a price of $1.60 per mini burger and a price of $1.80 per mini burger? Is demand elastic
or inelastic over this range?

Q 2. The demand for a particular brand of readymade shirts is found to vary with the
consumer’s income and its own price in the following manner:
Demand (units) Price (Rs./unit) Income (Rs.)

3000 750 5000

3600 650 5000

4500 650 6000

1
a. Find out the price elasticity of demand for the shirts when the price falls from 750 to
650.
b. Find out the income elasticity of demand when Income increases from Rs. 5000 to Rs.
6000.
c. By drawing neat diagrams of the above example, explain the difference between the
change in demand and change in quantity demanded.

Q 3. Rijo John has tried to estimate own and cross price elasticities for tobacco products in
India. His findings for own price elasticities are reported in the table below.
Bidis Cigarettes

Rural 0.91 0.41

Urban 0.87 0.17

a. Compare the demand for bidis and Cigarettes in rural and urban areas.

b. Draw neat diagrams for i) Demand Curve ii) Supply Curve iii) demand elasticity iv)
degrees of demand elasticity.

c. The demand for a product priced Rs. 10/unit and Rs. 8/unit is 200 and 400 units
respectively. Compute the point and arc elasticities (with diagram).

Q 4. Demand for a particular product was found to change from 1200 units to 900 units when
the income of the consumer fell from Rs. 45,000 to Rs. 41,000. Compute the income elasticity
of demand for the product.

Q 5. Two goods, tea and coffee, are related in such a way that when the price of any one is
varied, the demand for the other also varies. It was found that for consumers who are used to
consume tea, the demand for tea fell from 240 kg to 220 kg when the price of coffee was
decreased from its current price of Rs. 65/kg to Rs. 55/kg. Find out the cross elasticity of
demand for tea and state the relationship between the two.

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