Economics Assignment: Price Elasticity, Diminishing Returns, Labor Productivity

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Student
Name of the University
Author Note

1ECONOMICS ASSIGNMENT
Table of Contents
Answer 1....................................................................................................................................2
Answer 2....................................................................................................................................3
Answer 3....................................................................................................................................3
Answer 4....................................................................................................................................4
References..................................................................................................................................6

2ECONOMICS ASSIGNMENT
Answer 1
The relationship between the price and quantity of the concerned product can be seen
to be as follows:
Figure 1: Price and demand curve
(Source: As retrieved from the task file)
a. When the price increases from 0.25 by 20%, then the price becomes 0.30.
Thus, the demand for pop-corn will fall from 12 units to 8 units, thereby reducing the
sale by 4 units. The total revenue in the initial period was (0.25*12) = 3 units. With the fall in
the sales, the revenue becomes = (0.30*8) = 2.40 units, that is, the revenue decreases by 0.60
units.
b. When the price increases from 0.25 by 40%, then the price becomes 0.35.
The demand for the commodity, in this case, falls from 12 units to 6 units, thereby
reducing the sale by 6 units. The revenue, in this case falls from 3 units to (0.35*6) = 2.10
units, that is, the revenue decreases by 0.90 units (Hall and Lieberman 2012).