Week 4 questions

.docx

School

Baker College *

*We aren’t endorsed by this school

Course

101

Subject

Economics

Date

Feb 20, 2024

Type

docx

Pages

Uploaded by ElderPencil11749

1. Explain how a seller can determine whether the demand for his or her good is inelastic, elastic, or unit elastic between two prices. a A seller can determine if demand for a product is elastic, inelastic, or unit elastic by calculating the price elasticity of demand. The type of demand is determined by whether the price elasticity value is greater than, less than, or equal to one. To highlight, demand is elastic if the price elasticity is greater than one. 2. For each of the following, identify where demand is elastic, inelastic, perfectly elastic, perfectly inelastic, or unit elastic:  a. Price rises by 10 percent and quantity demanded falls by 2 percent.  b. Price falls by 5 percent, and quantity demanded rises by 4 percent.  c. Price falls by 6 percent, and quantity demanded does not change.  d. Price rises by 2 percent, and quantity demanded falls by 1 percent. a. Inelastic b. Elastic c. Perfectly Inelastic d. Inelastic 3.Prove that the price elasticity of demand is not the same as the slope of a demand curve. The slope of the demand curve equals the change in y over the change in x whereas the price elasticity of demand equals (the change in Q divided by the average Q) divided by (the change in P divided by the average P). 4 . Suppose the current price of gasoline at the pump is $4 per gallon and that 1 million gallons are sold per day. A politician proposes to add a $1 tax to the price of a gallon of gasoline. She says that the tax will generate $1 million in tax revenues per day. What assumption is she making? That it is Perfectly inelastic. 5. For each of the following, identify whether total revenue rises, falls, or remains constant:  a.Demand is inelastic and price falls.  b. Demand is elastic and price rises.  c. Demand is unit elastic and price rises.  d.Demand is inelastic and price rises.  e.Demand is elastic and price falls. A Demand is inelastic and price falls: Total revenue falls. B Demand is elastic and price rises: Total revenue falls.

C Demand is unit elastic and price rises: Total revenue falls. D Demand is inelastic and price rises: Total revenue rises. E Demand is elastic and price falls: Total revenue rises. 6. Suppose a straight-line downward-sloping demand curve shifts rightward. Is the price elasticity of demand higher, lower, or the same between any two prices on the new (higher) demand curve than on the old (lower) demand curve? For any linear demand curve, the absolute value of the price elasticity of demand will fall as we move down and to the right along the curve . 7. Suppose a city is hit by a tornado that destroys 25 percent of the housing in the area. Would you expect the total expenditure on housing after the tornado to be greater than, less than, or equal to what it was before the tornado? Explain your answer. The total expenditure on housing in Lenmore would likely be greater than it was before the tornado hit. Temporary housing and shelter expenses for affected residents can add to the expenditure. As a result, the overall spending on housing would increase due to these factors, surpassing the pre-tornado levels. 8. For each of the following pairs of goods, which has the higher price elasticity of demand?  a. Airline travel in the short run or airline travel in the long run  b. Television sets or Sony television sets  c. Cars or Fords  d. Cell phones or Samsung cell phones  e. Popcorn or Orville Redenbacher’s popcorn a) airline travel in the long run Time b) Sony TV sets Number of substitutes c) Fords Number of substitutes d) Samsung cell phones Number of substitutes e) Orville Redenbacher's popcorn Number of substitutes 9 . How might you determine whether toothpaste manufacturers and mouthwash manufacturers are competitors? Toothpaste manufacturers and mouthwash manufacturers are competitors which can be determined by the cross elasticity of demand . The elasticity of demand refers to the level of change of the demand of a particular product in relation to its price changes. 10. Suppose that the demand for product A is perfectly inelastic and that the buyers of A get the funds to pay for it by stealing. a. If the supply of A decreases, what happens to its price?

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Recommended textbooks for you

Essentials of Economics (MindTap Course List)

Economics

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:Cengage Learning

Principles of Economics 2e

Economics

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:OpenStax

Exploring Economics

Economics

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:SAGE Publications, Inc

Principles of Microeconomics

Economics

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:Cengage Learning

SEE MORE TEXTBOOKS

Recommended textbooks for you

Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Economics 2e
Economics
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:OpenStax
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Principles of Microeconomics
Economics
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:Cengage Learning