1. A firm increased the price of tea by 10% and sales of tea decreased from1000 packets per week to 950 packets per week. (a)Calculate the PED of tea.
(b)What does this PED value suggest about how sensitive consumers are to price changes?
(c)Draw the demand curve for tea.

2. A firm decreased the price of coffee from $ 20 per packet to $ 12 per packet. This has increased the sales of coffee from 700 packets per week to 800 packets per week.

(a)Calculate the PED of coffee.
(b)What does this PED value suggest about how sensitive consumers are to price changes?
(c)Draw the demand curve for coffee.

3. Explain two reasons why the demand for a product might be price elastic.

4. Does PED affect the total revenue of a firm. Explain how?

Presented below is a list of possible transactions. analyze the effect of the 18 transactions on the financial statement categories indicated. transactions assets liabilities owners’ equity net income 1. purchased inventory for $80,000 on account (assume perpetual system is used). 2. issued an $80,000 note payable in payment on account (see item 1 above). 3. recorded accrued interest on the note from item 2 above. 4. borrowed $100,000 from the bank by signing a 6-month, $112,000, zero-interest-bearing note. 5. recognized 4 months’ interest expense on the note from item 4 above. 6. recorded cash sales of $75,260, which includes 6% sales tax. 7. recorded wage expense of $35,000. the cash paid was $25,000; the difference was due to various amounts withheld. 8. recorded employer’s payroll taxes. 9. accrued accumulated vacation pay. 10. recorded an asset retirement obligation. 11. recorded bonuses due to employees. 12. recorded a contingent loss on a lawsuit that the company will probably lose. 13. accrued warranty expense (assume expense warranty approach). 14. paid warranty costs that were accrued in item 13 above. 15. recorded sales of product and related service-type warranties. 16. paid warranty costs under contracts from item 15 above. 17. recognized warranty revenue (see item 15 above). 18. recorded estimated liability for premium claims outstanding.