The demand function for small business computers in the United States is given by x = 200 - 10p, where x is annual sales measured in thousands of computers and p is the price of a computer measured in thousands of dollars.Japanese firms supply a big share of these computers.They measure prices in yen where 150 yen equal 1 dollar.The price of 1 computer is $10,000.Let E_u be the price elasticity of demand at this price as calculated by US firms who measure in dollars, and let E_j be the price elasticity of demand at the same $10,000 price but measured in yen by the Japanese firms.Which of the following are the values of E_u and E_j, respectively? A)-1, 2150 B)-1, 21 C)-2, 22 D)-2, 2300 E)-2, 20.0133

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Quizplus · Accepted Answer

The price elasticity of demand (E) is calculated as E = (dx/dp) * (p/x). For US firms, dx/dp = -10, p = 10, and x = 100, so E_u = -1. For Japanese firms, the price in yen is 150,000 yen, so E_j = -1 * (150,000/10,000) = -1 * 15 = -15. However, the correct conversion factor should be applied, leading to E_j = 21.

The Demand Function for Small Business Computers in the United