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Hello.
00:02
Here we have many questions so let's answer all of them one by one.
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Let's start with part one.
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It's given that the percentage change of the price is 5%.
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So there is an increase in the price by 5 % and quantity demanded decrease by 10%.
00:27
And now we can find the price elasticity of demand.
00:37
It's a equal to the ratio of percentage change in quantity which is negative 10 % over the percentage change in price which is 5 % and the price elasticity of demand is negative 2 okay now part b since negative 2 in the absolute value is which is 2 is greater than 1 demand is elastic demand, let me write it, capital d, demand is elastic.
01:26
Okay, now part c of question one.
01:32
If the price of the product a increases, what happens to total revenue? so since demand is elastic and there is an increase in the price or price increases, and demand, demand.
01:52
Demand is elastic so using this two piece of information we can conclude that total revenue will decrease only because the demand is elastic and part d if the price increases by 1 % by how much quantity demanded will decrease so since price the system of demand is equal to negative 2 and the price will increase by 1%, not by 5%.
02:47
Now we can find that the percent change in quantity demanded would be equal to negative 2 times 1 % increase in the price, it will be negative 2 % decrease.
03:11
This is the answer to the first question.
03:17
Now let's go to the other questions.
03:20
There are how many five of them.
03:23
Question number two.
03:24
Assume the percentage increase in the price of product x is 4%.
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And the change in quantity demand of product y is negative 5.
03:40
And let's find the cross price elasticity of demand.
03:44
So cross price elasticity of demand.
03:49
We divide the change in quantity demanded for product y, which is negative 5%.
03:58
And over the increase in the price of product x, which is 4%.
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And our answer is negative 1.
04:09
Negative let me write it clearly negative 1 .25 and since this number is negative we can conclude that increase in the price of one good decreases demand for the second one and they are compliments okay now the third question income increased by 4 % and quantity demanded decreased by 6%...