I also think it's A.
Q#1 Answer: (A) Elasticity of demand is influenced by the time elapsed since a price change. The time frame within which the supply decision is made and the ability to substitute productive resources are factors that influence elasticity of supply.
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Today's Q (Question provided by Elan Guides)
Q#2: A good has a price elasticity of demand of 1.2. In response to an increase in price of 30%, quantity demanded will change from 150 units to:
A. 104.24
B. 195.76
C. 96
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Its Clearly A.
Let me know if anybody needs explanation for this.
To fundamentally understand look at it as an equation of a line Y = mx+c with c = 0 here as Price and demand have an inverse relation and hence the slope which is price elasticity of demand is -ve 1.2 so and as 1.2 is the price elasticity of demand basically
(demand1-demand2)/ (price1 - price 2) => y is demand here so based on Y=mx => demand drop is -1.2*30% = 36%..Sorry my explanation is mathematical in nature as my mind understands economics thru mathematics
Yaa... you r correct...I think I made some mistake in calculation.
But grt explanation Shiva.
Thanx Shiva for the calculations and elaborate explanation!
Q#2 Answer: (C) Price elasticity of demand = % change in Q / % change in price
-1.2 = x / 30%, x = -36%
-36% = (x - 150) / 150 giving x = 96.
Great explanation, Shiva
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Today's Q (Questions and answers provided by Elan Guides)
Q#3: 3. Which of the following most accurately describes efficient resource allocation in an unregulated economy?
A. Consumer surplus is maximized.
B. Consumer surplus equals producer surplus.
C. The sum of producer and consumer surplus is maximized.
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I think the consumer surplus should equal producer surplus.
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