Discussion: LO1 to LO4
Name:
Please submit by 11:59 pm on October 5th on Brightspace in the dropbox for marks.
1. A business currently charges $14 for their product. The quantity demanded at that price is
15000 units. The business wants to increase their price to $20. They expect that demand will
decrease to 10000 units. What is the company’s price elasticity of demand? Interpret your
answer?
2.
Complete the chart below with average variable cost, average fixed cost, average total cost and
marginal cost
Output
Variable
Cost
1
2
4
6
8
10
5
10
14
28
60
130
Average
Variable
Cost
Fixed
Cost
Average
Fixed
Cost
Total
Cost
20
20
20
20
20
20
3. Given the graph below, calculate total revenue, total cost and profit.
Average
Total
Cost
Marginal
Cost
4. Fill in the following revenue chart. Is the company operating in perfect competition or a
monopoly? What additional information would we need to determine the profit maximizing
quantity for this firm?
Quantity
1
2
3
4
5
6
7
Price Firm
Receives
$100
$85
$70
$50
$30
$15
$0
Total Revenue
5.
Price ($)
Demand
(thousands of
computers)
Supply
(thousands of
computers)
1500
1
16
1400
2
14
1300
3
12
1200
4
10
1100
5
8
1000
6
6
900
7
4
800
8
2
700
9
1
Average Revenue
Marginal
Revenue
Gigatech produces computers. They are trying to determine what is the best price to charge for their
computers and how much they should supply.
a. Given the demand and supply schedule above, what is the equilibrium price?
b. There is a shortage of chips needed for the computers. Which way will the supply curve shift?
What impact does that have on price and supply?
c. What role could microeconomics and macroeconomics play in the scenario in question (b)?
Think on an individual level – how might individual behaviour change in the face of this? On a
macro level – how might the government intervene in this scenario and how would that change
the price and quantity demanded?