Author Question: In early 2009 the price of computer memory chips rose. In a demand and supply model, shifts in what ... (Read 59 times)

tuffie · **on:** Jun 29, 2018

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 · **Reply #1 on:** Jun 29, 2018

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.