Question

Please answer the following questions:

1. Qiqi, a highly motivated entrepreneur plans on applying for a business loan from Bank of America. She finds out that the percent change in price of business loans increased to 5% last month. This resulted in a 50% percent change in quantity demanded from 1000 applicants to 500 applicants. What is the business loan’s price elasticity?

2. Angeline, a bright college student finds out that the iPhone 8 was just launched this past week in Cupertino, CA. She along with the thousands of consumers plans on purchasing the iPhone 8 from Best Buy due to a price decrease from $899.99 to $649.99. Apple expects to see the quantity demanded for iPhone 8 to rise from 2 million to 3 million by the end of the year. What is the iPhone 8’s elasticity of demand?

3. Kenny is a terrific athlete as he is the captain of his basketball team. The championship game is this weekend, so he plans on buying new shoes for his entire team from Dick’s Sporting Goods, but realizes that the price of socks increased from $5.00 a pair to $8.00 a pair. Now, Kenny only consumes 3 Nike Air Jordan shoes instead of his initial intent of purchasing 10 shoes. What is the cross price elasticity of demand for a Nike Air Jordan shoe with respect to a sock’s price?

4. Franklin is a skilled mechanical engineer, the president of his labor union at BMW, and an aspiring chef by night. Collective bargaining talks seem to sour with executives and looks as if a pay cut will be implemented by the end of the year. Many employees will be affected, especially his salary of $120,000 a year reduced to $100,000 a year. This expectation of a pay cut has changed his consumption habits for wild caught salmon of 40 per week to 25 per week. Franklin now plans on purchasing more farm raised salmon in lieu of wild caught salmon increasing his consumption from 10 per week to 60 week. What is Franklin's income elasticity of demand for farm raised salmon? What is Franklin's income elasticity of demand for wild caught salmon?

5. Dell has gone through some market challenges these past few years, especially with the desktop market. If the prices of desktop computers decreases by 14% last quarter resulting in an increase of 12% in quantity demanded, then Dell will decrease the quantity supplied of desktops by 10%. What is the price elasticity of supply for Dell desktops?

6. The price of cell phones rose slightly higher from $500.00 to $550.00 this past month, and Samsung found out about Apple’s release of the iPhone X, so in turn it decided to increase production of its Galaxy S8 from 150,000 to 300,000 to compete with its rival. What is the price elasticity of supply for Galaxy S8 phones?

Answer 1