When the Price of a Flashlight Is $5,the Number of Flashlights

question 143

Essay

When the price of a flashlight is $5,the number of flashlights demanded is 600 units.When the price increases to $20 per unit,the quantity demanded falls to 200 units.Moreover,if the price of the cells used to operate these flashlights falls by 200 percent,the demand for flashlights increases from 200 units to 300 units.
a)Calculate the arc price elasticity of demand.
b)Calculate the cross-price elasticity of demand.
c)When Joe earns $30,he purchases 20 flashlights.When his income increases to $120,his quantity demanded increases to 60 units.Calculate Joe's income elasticity of demand for flashlights.

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Definitions:

Average Total Cost

The total cost per unit of output, calculated by dividing the total cost by the quantity of output produced.

Efficient Scale

The level of production at which a firm operates with the lowest average total costs, achieving economies of scale without incurring diseconomies of scale.

Short-Run Cost Curves

Graphical representations that show the relationship between a firm's costs and output levels in the short term.

Long-Run Curve

The graphical representation in economics of the relationship between output and input when all inputs are variable, showing potential economies of scale.