Full name: Ton Nu My Duyen
Class: E-BBA 11.1
Student code: 11191366
ASSIGNMENT TOPIC 3
Exercise 1
When a restaurant charges 10$ per meal (per person) it found that Mr.
and Mrs. Binh, who are typical customers, dined out once a month,
Ceteris Paribus. When the restaurant, as a promotional device,
introduced a voucher system giving patrons two meals for the price of
one, the Binh’s dined out three times a month.
a. Calculate the elasticity of demand for this restaurant.
+ Percentage change in price =
−$5
$10
×
100 = – 50%
+ Percentage change in quantity =
2
1
×
100 = 200%
Price elasticity of demand is: EpD =
%∆ Q
%∆ P
=
−200 %
50 %
= 4.0 >1 => Elastic
b. Explain what impact the promotional vouchers had on the Binh’s
monthly expenditure on meals at this restaurant. Is the change in total
expenditure consistent with the value of demand you calculate
– The promotional vouchers has made a big impact on the family’s
monthly expenditure by giving a double portion for the price of one ,
which pull the price down and increases the quantity demanded on meals
at the restaurant .
– The change in total expenditure will remained consistent with the value
of demand as long as all other factors held constant (Ceteris paribus)
Exercise 2
2.1. College Enrollment and Apartment Prices
Consider a college town where the initial price of rental apartments is
$400 and the initial quantity is 1,000 apartments. The price elasticity of
demand for apartments is 1.0 and the price elasticity of sully of
apartments is 0.5.
a. Use demand and supply curves to show the initial equilibrium, and
label the equilibrium point a.
+ EpD = 1 =
∆ Q
∆ P
.
P
Q
=
∆ Q
∆ P .400
1000
↔
∆ Q
∆ P =5
2
+ The demand equation: P = a – b×Qd
