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Economics Homework Ten - Model (view source)
Revision as of 21:18, November 26, 2009
, 21:18, November 26, 2009halfway through proof in question 8
8. Mathematically prove (or disprove!) the answer to the question on the midterm exam about P=30/Q.
8. Mathematically prove (or disprove!) the answer to the question on the midterm exam about P=30/Q.
:Teacher: Given that P=30/Q, then P times Q must equal 30 for all P and all Q. But revenue is P times Q, and thus revenue is always constant no matter what the price is. Changing the price does not change the revenue, and thus this is unit elasticity.
:But a more rigorous mathematical proof based on the equation for elasticity is desired:
::P<ref>ed</ref>=(%change in Q)/%change in P)
::If the new P and Q are denoted by P<sub>2</sub> and Q<sub>2</sub>, and the old P and Q are denoted by P<sub>1</sub> and Q<sub>1</sub>, then:
:::P<ref>ed</ref>=((Q<ref>2</ref>-Q<ref>1</ref>)/Q<ref>1</ref>)/((P<ref>2</ref>-P<ref>1</ref>)/P<ref>1</ref>)
(need to finish)
9. Provide, in your own words, the best definition of "public good" that you can.
9. Provide, in your own words, the best definition of "public good" that you can.