Answered: 8.2. The demand for Firm A is said to…

8.2. The demand for Firm A is said to be elastic. Do you agree with this statement? Justify your answer by calculating the elasticity coefficient by aid of the ARC (midpoint) formula.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter7: Market Efficiency And Welfare

Section: Chapter Questions

Problem 8P

See similar textbooks

Similar questions

Can you think of an industry (or product) with near infinite elasticity of supply in the short term? That is, what is an industry that could increase Qs almost without limit in response to an increase in the price?
Suppose both of these events took place at the same time. Combine your analyses of the impacts of the iPod and the tariff Induction to determine the likely impact on the equilibrium price and quantity of Sony Walkman-type products. Shaw your answer graphically.
Why is the demand curve with constant unitary elasticity concave?
Explain why using the midpoint formula for calculating the elasticity of demand gives the same result whether price increases or decreases, but using the initial price and quantity instead of the average does not.
When someones kidneys fail, the person needs to have medical treatment with a dialysis machine (unless or until they receive a kidney transplant) or they will die. Sketch a supply and demand diagram, paying attention to the appropriate elasticities, to illustrate that the supply of such dialysis machines will primarily determine the pure.
What are the likely consequences on the U.S. market for tobacco products for each of the events listedbelow? Which curve shifts, supply or demand?Please indicate the direction of shift. State whetherthe equilibrium price and quantity would increase,decrease, or stay the same. Show the changes usinga standard diagram with an upward-sloping supplycurve and a downward-sloping demand curve.a. The Food and Drug Administration classifiestobacco as an “addictive substance.”b. The Congress votes to raise the excise tax on alltobacco products.c. Hurricane Fran dumps 15 inches of rain onNorth Carolina and destroys 80 percent of thatstate’s tobacco crop.d. Sixteen states sue the major tobacco companiesfor billions of dollars because of tobacco-relatedcosts in their Medicaid programs.e. Medical evidence that more than two cups ofcoffee a day, considered by many to be a substitute for smoking, greatly increases the risk ofstomach cancer
Time remaining:00 :09 :39EconomicsUse the following to answer questions (29) - (31):In the town of “One Horse” there is one movie theater. Two groups of consumers, adults (A) andchildren (C), attend this theater. Suppose the demand for movies by adults is given by:QA = 50 - 0.50PA, where PAis price ofan adultmovie ticket(in cents)and QAis the numberofmovie tickets sold to adults atthe theater. Suppose the demand for movies by children is given by:QC = 20 - 0.50PC,where PCispriceofa children’s movie ticket(in cents)and QCis the numberofmovie tickets sold tochildren atthe theater. Also, imagine totalcostis fixed at$450, thus makingmarginalcostofprovidingonemore movie ticket to either an adult or a child constant at zero.[29]Ifthe movie theateris able to price discriminate amongits two groups ofconsumers, then itshouldcharge a higher price to group A.A.TrueB.False[30]Ifthemovie theateris able to price discriminate amongits two groups ofconsumers, then itsmaximum profit is closest in value…
The market demand for productXis given by: \[ Q_{d}=6-1 / 2 P \text { or } P d=12-2 Q \] The market supply for goodXis given by: \[ Q_{s}=-14+2 P \text { or } P s=7+1 / 2 Q \] whereP=price per unit andQis number of units. Draw a supply-and-demand graph with these curves. 1.) Using the line drawing tool, draw the supply and demand curves. Properly label your lines. 2.) Using the point drawing tool, plot the equilibrium point. Label your point 'E'. Note: Carefully follow the instructions above and only draw the required objects. The equilibrium price is$and the equilibrium quantity is unit(s). (Enter your responses as integers.) A per-unit excise tax is imposed on suppliers of productX, and the market supply with the tax is now given by: \[ Q_{s}=-19+2 P \text { or } P s=9.50+1 / 2 Q \] Using the graph on the right, show this supply curve. 1.) Using the line drawing tool, draw the new supply curve. Label your line 'S1+tax'.1. Note: Carefully follow the instructions above and only draw…
Chapter 2 Problem #5. Suppose the demand and supplycurves for a product are given by QD= 500 −2PQS=−100 + 3Pa. Graph the supply and demand curves.b. Find the equilibrium price and quantity.Qd= Q3500-2P= -100+3PP= Pe = 120 & Qe=260The equilibrium price is $120 and the quantity is 260c. If the current price of the product is $100, what is thequantity supplied and the quantity demanded? How would you describe thissituation, and what would you expect to happen in this market?d. If the current price of the product is $150, what is thequantity supplied and the quantity demanded? How would you describe thissituation, and what would you expect to happen in this market?e. Suppose that demand changes to QD= 600 â€“ 2P.Find the new equilibrium price and quantity, and show this on your graph.***PLEASE SHOW ALL EQUATIONS AND METHODS,
Say in a market we haveDemand is P = 5 – 0.005QSupply is P = 0.00125Qa-you will have a graph with price on the vertical axis and quantity on the horizontal axis formost parts of this problem. You will want to show intercept values and equilibrium values withthe specific values from the problem (when you graph the supply show it go out at least to thesame level of Q as the Q intercept for the demand curve).b-what are the equilibrium price and quantity traded in the market?c-say the government levies an excise tax in the market of 50 cents that renders the supply tonow be P = .00125Q + 0.5 (essentially the supply curve shifts up by 50 cents at each quantity).What are the new equilibrium price and quantity traded in the market with this excise tax?d-did the market price increase by as much as the 50 cent tax? (compare the market priceincrease with the amount of the tax of 50 cents)e-what is then loss in consumer surplus from the tax? Do consumers like excise taxes?f-what is the elasticity…
Suppose the government of the island has decided to give consumers a more attractive price for tomatoes by imposing a fixed, per unit subsidy. Thus, start with the original demand (Qd = 450 - 100P) and supply (Qs = 50P) and analyze this new intervention, the subsidy. The subsidy works like this: each tomato seller receives a 3-dollar refund for each kilogram of tomatoes sold. Write down the equation for the new "effective supply" curve. Determine the new equilibrium quantity and equilibrium price. What is the price that the consumers will pay for their tomatoes? What is the price that the producers will effectively earn for their tomatoes, inclusive of the subsidy? How much will the government spend on tomato subsidies in this case in total? (Recall the units of measurement: P is the price in dollars per kilogram of tomatoes; and Q is the quantity of tomatoes, expressed in thousands of kilograms.) Graphically depict the new equilibrium complete with (solved) values for the new…
In equilibrium, how many stoves would be sold and at what price? The demand for stoves is given by QD=450−20? and the market supply is given by QS = 20 + 100P. (i), calculate the price elasticity of demandfor stoves when price changes to $10ii. What would happen if suppliers set the price of stoves at $15? Explainthe market adjustment process. iii. Using the response in part (i), calculate the price elasticity of demandfor stoves when price changes to $10