Assignment 4 Consider the market for computers, if the demand function is Q = 56
ID: 1191681 • Letter: A
Question
Assignment 4 Consider the market for computers, if the demand function is Q = 5600 4p. Answer the following questions:
(1) When the price of computer is $700, what is the price elasticity of demand? Is the demand of computers elastic or inelastic at Price equal to $700? Why? (2) What’s the price elasticity when the computer manufacturer charges $800? Is this elastic or inelastic? (3) What’s the price elasticity of demand when the price of computers is $600? (4) Using your answers from (1) – (3) draw the demand curve, and indicate which parts of the demand curve are elastic and which are inelastic
Explanation / Answer
Q = 5600 - 4p
When P = $700,
Substituting, we get
Q = 5600 - 4(700)
Q = 5600 - 2800
Q = 2800
The equation is solved.
However, when the initial price and quantity demanded are not given it is not possible to find the responsiveness of quantity demanded to the change in the price at $700.