how to find the price elasticity if the quantity demand is 2 and the product price is 9

In a perfectly competitive market, if the market price is $5 and my price is $5.01, can I sell all my goods?

If the price of a product increases:

Multiple Choice

• the price increase has no effect on the producer surplus.

• the consumer surplus will not change.

• the consumer surplus will increase.

• the producer surplus will increase.

Suppose that in a market the current price is P1, a price higher than the equilibrium price, Pe. Is this market in equilibrium or in a disequilibrium state? Please explain by answering the following questions. ( Word answers only )

1. Is Qd=Qs, Qd>Qs or Qd<Qs at P1? Why?

2. Is there any excess (Xss) -- excess demand or excess supply in this market at P1? Why?

3. Will P1 stay the same or will there be a price adjustment? Why?

Suppose the price of good 1 is ?1 = $6, the price of good 2 is ?2 = $12. Alice has ? = $120 available to spend on these two goods. Alice has utility function ?(?1, ?2) = √?1√?2. a) Write down the optimality condition that must hold at the optimal solution to Alice’s utility maximization problem. b) Find Alice’s marginal utilities for good 1 and for good 2 and find her marginal rate of substitution. c) Find Alice’s demand functions for her optimal quantities to consume of goods 1 and 2 (i.e., find formulas for her optimal values of ?1 and ?2 as functions of only prices and income). d) Given the prices and the money she has available, what is Alice’s optimal consumption of goods 1 and 2?

Suppose the government sets a price floor that is above the equilibrium price for a given good. d)It can be said that at the price floor,

a)although sellers are selling all of the product that they desire at this price, the consumers are not able to buy all that they desire.

b)although consumers are purchasing all of the product that they desire at this price, the sellers are not selling all that they desire.

c)both sellers and buyers are satisfied with the quantity that is being exchanged.

d)both sellers and buyers are exchanging the equilibrium quantity of this good.

e)b and d

What is the difference between the cash price and the futures price of the financial instrument used for a hedge known as? a. Spread risk. b. Dollar gap risk. c. Duration gap risk. d. Basis risk.

Price elasticity of demand measures consumers’ responsiveness to changes in the price of a good. There are a number of variables that affect consumers’ decisions, among them the following:

• The availability of substitutes
• The specific nature of the good
• The part of income spent on the good
• The time consumers have to buy the good

Please draw on your experiences as a consumer and your Unit 2 readings to address the following 4 topics. Make sure you use economic concepts in your main contribution.

1. Choose a product that you have purchased in the past 1–3 months from a clothing or shoe store.
2. Describe how each of the 4 factors listed above contributed to the elasticity of the good.
3. Is the product considered elastic, inelastic, or unitary elastic?
4. What effect does the current supply and current demand have on this product?

The price elasticity of bananas is -0.8 and the cross price elasticity of bananas with respect to
the price of berries is 0.5. If the price of bananas increases by 10 % and the price of berries
falls by 4 %, what will happen to banana demand?
a. A 10 percent increase
b. A 10 percent decrease
c. A 16 percent increase
d. A 5 percent increase
e. None of the above

Consider a call option on a stock, the stock price is $23, the strike price is $20, the continuously risk-free interest rate is 9% per annum, the volatility is 39% per annum and the time to maturity is 0.5.

(i) What is the price of the option? (6 points).

(ii) What is the price of the option if it is a put? (6 points)

(iii) What is the price of the call option if a dividend of $2 is expected in 60 days? (8 points)