In early 2009 the price of computer memory chips rose. In a ...

[tuffie]

In early 2009 the price of computer memory chips rose. In a demand and supply model, shifts in what curve(s) could have brought about the higher price?
 
  What will be an ideal response?

Question 2

When the price of a movie ticket falls from 14 to 10, the quantity of tickets demanded increases from 500 to 700 a day. What is the price elasticity of demand for movie tickets? (Use the midpoint method.)
 
  What will be an ideal response?

[nekcihc358]

Answer to Question 1

The higher price could have been brought about by an increase in demand, a decrease in supply, or the combination of an increase in demand combined with a decrease in supply. Hence the higher price could have been the result of a rightward shift in the demand curve, a leftward shift in the supply curve, or a combined rightward shift of the demand curve and leftward shift of the supply curve.

Answer to Question 2

The price elasticity of demand = (percentage change in the quantity demanded)  (percentage change in the price). Using the midpoint method to calculate the percentages, the percentage change in the quantity demanded = (700 - 500 )  (600 )  100 = 33.3 percent and the percentage change in the price is (10 - 14 )  (12 ) = -33.3 percent. We ignore the negative sign so that the price elasticity of demand equals (33.3 percent)  (33.3 percent), or 1.00.

[tuffie]

TYSM

[6ana001]

Gracias!