Assignment 1:
The tables below show the cumulative demand for 12 ounce cans of Coca-Cola as provided by students in a previous class.
|
Original
|
|
Income Doubles
|
|
Pepsi is $.20 cheaper than Coke
|
|
Price
|
950
|
200
|
Avg.
|
|
Price
|
950
|
200
|
Avg.
|
|
Price
|
950
|
200
|
Avg.
|
|
$1.50
|
54
|
26
|
40
|
|
$1.50
|
87
|
40
|
64
|
|
$1.50
|
44
|
20
|
32
|
|
$1.25
|
63
|
30
|
47
|
|
$1.25
|
100
|
46
|
73
|
|
$1.25
|
55
|
27
|
41
|
|
$1.00
|
83
|
36
|
60
|
|
$1.00
|
125
|
56
|
91
|
|
$1.00
|
67
|
35
|
51
|
|
$0.75
|
115
|
53
|
84
|
|
$0.75
|
175
|
82
|
129
|
|
$0.75
|
92
|
48
|
70
|
|
$0.50
|
160
|
75
|
118
|
|
$0.50
|
241
|
106
|
174
|
|
$0.50
|
140
|
70
|
105
|
1. Using the "Avg." column in the first table calculate self-price elasticity assuming the price of Coke increases from $1.00 to $1.25 per can (use the mid-point formula).
2. Using the first table and the second table (the "Avg. columns) calculate the income elasticity for Coke assuming income doubles and the price is $1.00 per can (again, use the mid-point formula). No matter what level of income you have, if you double it the percent change in income (when using the mid-point formula) will always be 66.7%. So, 66.7% will be your denominator.
3. Using the first table and the third table (the "Avg. columns) calculate the cross-price elasticity of demand for Coke assuming that table one shows the demand for Coke when the price of Coke is $1.00 per can and the price of Pepsi is $1.00 per can, and that table three shows the demand for Coke when the price of Coke is $1.00 per can and the price of Pepsi is $.80 per can (again, use the mid-point formula).
Assignment 2:
The purpose of this assignment is to give you a better understanding of consumer and producer surplus. To keep it simple, keep in mind the formula for finding the area of a triangle which is: Area equals one-half of the height of the triangle multiplied by the base of the triangle, or A=.5(h x b)
A local restaurant sells the best hotwings in town. A single consumer's demand for the hotwings is shown in the table and graph below
|
Price
|
Quantity
|
|
$14
|
0
|
|
$12
|
1
|
|
$10
|
2
|
|
$8
|
3
|
|
$6
|
4
|
|
$4
|
5
|
|
$2
|
6
|
|
$0
|
7
|
a) If the equilibrium price of a serving of hotwings is $6.00, how much consumer surplus does the consumer receive? (figure out the area of triangle A)
b) Explain how you calculated it.
c) What is the producer surplus? (figure out the area of triangle B).