Q2. a. Explain why the price elasticity of demand is negative and why economists generally ignore the sign. b. Explain w...
Q2.
a. Explain why the price elasticity of demand is negative and why
economists generally ignore the sign.
b. Explain why the price elasticity of demand varies along a linear
downward sloping demand curve.
c. Explain why the income elasticity of demand for swimming pools
in Australia would be important for Australian swimming pool
manufacturers given:
i. A substantial decrease in Australian income tax rates
ii. A forecast recession
Homework Answers
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Q2. a. Explain why the price elasticity of demand is negative and why economists generally ignore the sign. b. Explain w...
Distinguish the following and identify each with the appropriate formula; a. Price elasticity of demand b....
Distinguish the following and identify each with the appropriate formula; a. Price elasticity of demand b. Cross price elasticity of demand c. income elasticity of demand d. Why is elasticity of demand higher along a linear demand curve?
Exercise 4.1: Price Elasticity of Demand The price of a good is $200, and the quantity...
Exercise 4.1: Price Elasticity of Demand The price of a good is $200, and the quantity demanded is 2,000. The price elasticity of demand is-1.25. If the price changes to $204, what is the new quantity demanded? Exercise 4.2: Income Elasticity of Demand A consumer's income is $40,000, and the quantity demanded of a good is 2,000. The income elasticity of demand is +0.60. If the consumer's income changes to $41,000, what is the new quantity demanded? Exercise 4.3: Income...
For each of the following cases, calculate the point price elasticity of demand, and state whether...
For each of the following cases, calculate the point price elasticity of demand, and state whether demand is elastic, inelastic, or unit elastic. The demand curve is given by QD = 5,000 – 50 PX a. If the price of the product is $50. b. If the price of the product is $75. 2) For each case, should the firm raise or lower the prices to maximize revenues? Why or Why not? Explain. 3) Suppose the income elasticity of demand...
Explain the cross-price elasticity of demand. Why is it negative or positive for certain types of...
Explain the cross-price elasticity of demand. Why is it negative or positive for certain types of goods?
A linear downward-sloping demand curve has price elasticities (in absolute values) that increase as price decreases....
A linear downward-sloping demand curve has price elasticities (in absolute values) that increase as price decreases. remain constant along the demand curve. decrease as price decreases. are greater than or equal to 1. Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of demand? 0,11 0.37 9.33...
(8 marks total) QUESTION 11 a) Why are both the price elasticity of demand and the price elasticity of supply likely to...
(8 marks total) QUESTION 11 a) Why are both the price elasticity of demand and the price elasticity of supply likely to be greater in the long run? (3 marks) b) Choose a good and draw both a demand and supply curve for that good. Explain and show how an increase in household income would affect the equilibrium price and quantity. (5 marks) QUESTION 12 A firm will continue producing in the short run even if it is making a...
a. Explain how price elasticity can be elicited through experimentation. Why is this likely to tell...
a. Explain how price elasticity can be elicited through experimentation. Why is this likely to tell you about a relatively small part of the demand curve you are interested in? b. Price is not the only factor that comes into play in determining how much of a product consumers will demand, and these other factors will need to be taken into account when a firm tries to forecast how much of a product it should aim to produce and sell....
The table below shows a hypothetical demand and supply schedule for CD players. Price, K Quantity...
The table below shows a hypothetical demand and supply schedule for CD players. Price, K Quantity demanded, thousand/yr Quantity supplied, thousands/yr 100 10 3 120 9 4 140 8 5 160 7 6 180 6 7 200 5 8 Plot the supply and demand curves on the same diagram Find the equilibrium price and quantity Using the same data, what is the excess supply or demand When the price is K120? When the price is K200? Explain why and in...
Generally, when economists talk of the interest rate what are they talking about? For the CPI,...
Generally, when economists talk of the interest rate what are
they talking about?
For the CPI, what is the base year? a. It is the year the CPI first appeared. O b. It is the benchmark against which other years are compared, and it changes each year. O c. It is the year prior to the year for which the CPI is calculated. O d. It is the benchmark against which other years are compared, and it changes occasionally. Price...
question 1,2,3 and 4 Explain the three reasons why the aggregate-demand curve slopes downward.. Give an...
question 1,2,3 and 4
Explain the three reasons why the aggregate-demand curve slopes downward.. Give an example of an event that would shift the aggregate-demand cure. Which way would this event shirt the curve? 2. Suppose that the election of a popular prime minister suddenly increases les confidence in the future. Use the model of aggregate demand and aggregate supply to analyze the effect on the economy Name two macroeconomic variables that decline when the economy goes into a recession....
Exercise 4.1: Price Elasticity of Demand The price of a good is $200, and the quantity demanded is 2,000. The price elasticity of demand is-1.25. If the price changes to $204, what is the new quantity demanded? Exercise 4.2: Income Elasticity of Demand A consumer's income is $40,000, and the quantity demanded of a good is 2,000. The income elasticity of demand is +0.60. If the consumer's income changes to $41,000, what is the new quantity demanded? Exercise 4.3: Income...
A linear downward-sloping demand curve has price elasticities (in absolute values) that increase as price decreases. remain constant along the demand curve. decrease as price decreases. are greater than or equal to 1. Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of demand? 0,11 0.37 9.33...
(8 marks total) QUESTION 11 a) Why are both the price elasticity of demand and the price elasticity of supply likely to be greater in the long run? (3 marks) b) Choose a good and draw both a demand and supply curve for that good. Explain and show how an increase in household income would affect the equilibrium price and quantity. (5 marks) QUESTION 12 A firm will continue producing in the short run even if it is making a...
Generally, when economists talk of the interest rate what are
they talking about?
For the CPI, what is the base year? a. It is the year the CPI first appeared. O b. It is the benchmark against which other years are compared, and it changes each year. O c. It is the year prior to the year for which the CPI is calculated. O d. It is the benchmark against which other years are compared, and it changes occasionally. Price...
question 1,2,3 and 4
Explain the three reasons why the aggregate-demand curve slopes downward.. Give an example of an event that would shift the aggregate-demand cure. Which way would this event shirt the curve? 2. Suppose that the election of a popular prime minister suddenly increases les confidence in the future. Use the model of aggregate demand and aggregate supply to analyze the effect on the economy Name two macroeconomic variables that decline when the economy goes into a recession....
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