Supply and Demand Practice Problems
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The document contains practice problems on supply and demand elasticity and production stages for a corporation. It asks to determine elasticity for products where price and quantity change, and to fill in a production schedule to answer questions about break-even point, production stages, and profit maximization for a corporation paying workers $22.50/hour and selling products for $9 each.
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Supply and Demand Practice Problems
- 1. Supply and Demand Practice Problems Due Tuesday 6/15
- 2. Using the “total revenues/expenditures test”, determine the demand elasticity of the following. (elastic, inelastic or unit elastic) 3,000 pounds of product A sells for $2.40/pound. If the price drops by 1/6, the amount sold will increase by 25%. 20,000 kilos of commodity B sells for $15.00/kilo. The quantity sold decreases by 15% as the price increases by 1/5. 1,000 kilo of commodity C brings in $150.00/kilo. The quantity purchased drops 25% when the price is increased by 1/3. 5,000 bales of crop D sell for $45.00/bale. The price drops 20%, causing the number of bales purchased to increase 18%.
- 3. Corporation W pays its workers $22.50/hour for an 8 hour day. It will sell its product in the market for $9.00 each. Fill in the missing information on the supply schedule below and then answer the subsequent questions. Worker number _____ would be the one hired allowing Corp. W to pass its break-even point. Worker number _____ would be the last worker hired allowing Corp. W to remain in Stage I of production. Worker number _____ would be the last worker hired allowing Corp. W to remain in Stage II of production. Worker number _____ would be the first one hired that pushed Corp. W into Stage III of production. Worker number _____ would be the last worker hired to maximize profits. # of workers Total Product Marginal Product Fixed costs Variable Costs Total Costs Marginal Costs Total Revenue Marginal Revenue Total Profits Marginal Change in Profits 0 0 0 $250 $0 $250 $0 $0 $0 -$250 $0 1 5 $250 $9 2 20 $250 $9 3 45 $250 $9 4 80 $250 $9 5 125 $250 $9 6 180 $250 $9 7 245 $250 $9 8 320 $250 $9 9 405 $250 $9 10 500 $250 $9 11 550 $250 $9 12 570 $250 $9 13 495 $250 $9 14 410 $250 $9