ASSIGNMENT: 4

ECONOMIC ANALYSIS FOR MANAGERS

SUBMITTED BY: GHAYAS AHMED KHAN

ID: 01278

IQRA UNIVERSITY ISLAMABAD CAMPUS

Q1.During a five-year period, the ticket sales of a citys professional basketball team have increased
30 percent at the same time that average ticket prices have risen by 50 percent. Do these changes
imply an upward-sloping demand curve? Explain.
Ans: The fact that increased sales coincided with higher prices does not disprove the law of down ward
sloping demand. Clearly other factorsan increase in population and/or income, improved play of the
home team, or increased promotioncould have caused increased ticket sales, despite higher prices.
Q2. A retail store faces a demand equation for Roller Blades given by:Q=180-1.5P where Q is the
number of pairs sold per month and P is the price per pair in dollars.
a. The store currently charges P $80 per pair. At this price, determine the number of pairs sold.
b. If management were to raise the price to $100, what would be the impact on pairs sold? On the
stores revenue from Roller Blades?
c. Compute the point elasticity of demand first at P= $80, then at P= $100. At which price is demand
more price sensitive?

a.

Q=180-1.5P
Now, we know that if P=80$ Then quantity demanded is,
Q=180-1.5(80)
Q=60
It means 60 pairs sold per month at price P=60$
Revenue, R1=Q*P
R1=60*80
R1=4800

b.

Similarly if price change from 80$ to 100 $ then Q become

Q=180-1.5p
Now, we know that if P=80$ Then quantity demanded is,
Q=180-1.5(100)
Q=30
It means 30 pairs sold per month at price P=100$
Revenue, R2=Q*P
R2=30*100
R2=3000
Difference, R=R1-R2

R=4800-3000
R=1800

c.

So, after computation it tells us that if the price per unit pairs change or increased from
to 100$ then
both the quantity demanded and decreases . This means the quantity demanded is sens
to elasticity.
Or elasticity of demand because the change in quantity demanded due to a change in price is la