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Microeconomics

Assignment 2
Please submit your answers properly labeled, in order, in one Word document.
1. a. Using the data from Assignment 1 (also shown in the table below), calculate the elasticity of demand and elasticity of supply at each price change in the market for movie tickets using the midpoint formula for both supply and demand. (3 marks)
Price
Quantity Demanded
Elasticity of Demand
Quantity Supplied
Elasticity of Supply
$5
350,000
10,000
$8
250,000
20,000
$10
150,000
50,000
$13
125,000
85,000
$15
110,000
110,000
$18
80,000
150,000
$20
45,000
300,000
$25
25,000
350,000
b. Based on your elasticity calculation, if the price of movie tickets rises from $13 to $15 will total revenue go up or down? By how much? You need to answer the first part of this question using the elasticity of demand at this point. (2 marks)
2. Define the following terms and provide a new example of each (not the one in the textbook). (2 marks)
a. Deadweight losses
b. Free-rider problem
3. Data on two individuals’ preferences for a public good are reflected in the table below. PA and PB represent the prices individuals A and B, the only two people in the society, are willing to pay for an extra unit of a public good, rather than do without.