Microeconomics Assignment-1

Running head: Microeconomics
Microeconomics
Name of the Student
Name of the University ‘
Student ID

Microeconomics1
Table of Contents
Answer 1..........................................................................................................................................2
Answer 2..........................................................................................................................................4
Answer 4..........................................................................................................................................5
Answer 6..........................................................................................................................................8
Reference.......................................................................................................................................11

Microeconomics2
Answer 1
(i) Cross price elasticity shows the change in quantity demanded of a product due to change in
price of another product.
Stop Deca y' s Cross price elasticity=
QSD 2−QSD 1
QSD 2 +QSD 1
2
PDF 2−PDF 1
PDF 2 + PDF 1
2
¿ , Stop Deca y' s Cross price elasticity=
1500
14500
2
5
65
2
¿ , Stop Deca y' s Cross price elasticity=−1.35
The cross price elasticity of Stop Decay’s electric tooth brush found to be -1.35 which means it is
highly elastic and it can be inferred from the result that two concerned products are substitute
products.
(ii)
Price elasticity of demand=
QSD 2−QSD 1
QSD 2 +QSD 1
2
PSD 2−PSD 1
PSD 2 + PSD 1
2

Microeconomics3
¿ ,−1.5=
8000−6500
8000+6500
2
PSD 2−25
PSD 2+ 25
2
¿ ,−1.5=
1500
14500
PSD 2−25
PSD 2 +25
¿ , PSD 2=21.77
Stop Decay need to lessen its price to $21.77.
(iii)
Revenue before price change=25 ×6500
¿ , Revenue before price change=$ 162500
Revenue after price change=21.77 ×8000
¿ , Revenue after price change=$ 174160
(iv) In part (iii) after decrease in price of Stop Decay’s electric toothbrush the total revenue has
improved and owing to that the outcome is desirable. The aspects that are required to consider
are level of the profit margin, the part of marginal cost (MC) curve in which the concerned firm
is operating (Bush et al., 2018). It means that if the firm is operating at the profit maximizing
condition that is MC=MR or not and if the firm is operating in an oligopoly market then it should
at least earn super normal profit and if the firm is in perfectly competitive market then it should