1. An improvement in the weather led to an increase of 60% in the size of...
1. An improvement in the weather led to an increase of 60% in the size of the corn crop. The demand curve for corn did not change. The price of corn fell by 20%. Calculate the elasticity of demand.
2. Suppose that the oil cartel succeeded in reducing the supply of crude oil by 5% and suppose that the price elasticity of demand for crude oil is -0.10. What will happen to the equilibrium price of crude oil?
3. Your company sells snack cakes for $2 apiece. You sell 300 per week. The weekly income in the area is $800. The income changes suddenly, dropping to $600 and your sales drop to 75 per week. Nothing else has changed. Calculate the elasticity.
Homework Answers
Price elasticity of demand is given by percentage change in quantity demanded divided by percentage change in price.
Price elasticity of demand is given by percentage change in quantity demanded divided by percentage change in price.
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1. An improvement in the weather led to an increase of 60% in
the size of...
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Carla consumes 10 juices per week when the price is $1.50 per unit. A reduction in this year’s orange crop led to 50% an increase in the price of juice. At the new price level, Carla’s weekly juice consumption fell to 6 units. Calculate Carla’s own- price elasticity of demand for juice. Hints: Use the Arc Method (or Mid-Point Formula). Use two decimal spaces to round-off your answer. For example, if your answer is -3.257123 , it should be entered...
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In the market for televisions, the price of a television falls and nothing else changes. Price (dollars per television) Show the effect of this change o os Choose between the following Use the single arrow tool to draw an arrow on the demand curve showing the direction of movement along the line OR Use the line tool to draw a new demand curve Only one of the effects is correct, and you must determine which is the appropriate one to...
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