Answered: If consumers expect the price of a good…

If consumers expect the price of a good to decrease in the future and all else is held constant, we would assume that the demand curve would

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter20: Consumer Choice And Elasticity

Section: Chapter Questions

Problem 3CQ: Recent research confirms that the demand for cigarettes is not only inelastic, but it also indicates...

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Recent research confirms that the demand for cigarettes is not only inelastic, but it also indicates that smokers with incomes in the lower half of all incomes respond to a given price increase by reducing their purchases by amounts that are more than four times as large as the purchase reductions made by smokers in the upper half of all incomes. How can the income and substitution effects of a price change help explain this finding?
Fill in the marginal utility schedule for each of the goods. Assume that the price of food is $20, clothing $10, and housing $30. What is marginal utility per $ derived from consumption of the first unit of each of t1 three commodities? If Smith had only $20 to spend, which good(s) would he Assume that Smith's income is $130/week. If he purchased only the three commodities and faced the price structure in part b, how many units of each . would he demand per week?
Suppose Coke and Pepsi are perfect substitutes for me, and right and left shoes are perfect complements. A. Suppose my income allocated to Coke/Pepsi consumption is $100 per month, and my income allocated to right/left shoe consumption is similarly $100 per month. a. Suppose Coke currently costs $0.50 per can and Pepsi costs $0.75 per can. Then the price of Coke goes up to $1 per can. Illustrate my original and my new optimal bundle with "Coke" on the horizontal and "Pepsi" on the vertical axis. b. Suppose right and left shoes are sold separately. If right and left shoes are originally both priced at $1, illustrate (on a graph with "right shoes" on the horizontal and "left shoes" on the vertical) my original and my new optimal bundle when the price of left shoes increases to $2. c. True or False: Perfect complements represent a unique special case of homothetic tastes in the following sense: Whether income goes up or whether the price of one of the goods falls, the optimal bundle…
a. Determine the demand functions of x and y in the case of a Cobb-Douglas type utility function, in the following cases: α=0.40;β=0.60 Graph the demand functions of the two goods (price as a function of quantity) assuming the individual's income is $500 - Determine what is the quantity demanded of x and y, if the price of good x is USD 1, the price of good y is USD 4, and income is USD 500 - Now, explain what happens to the quantity demanded if the prices of the goods are doubles holding income constant.
In the bread market, Maria buys different amounts of bread conditional on whether the price is $2, $5, or $7 a loaf. To generate Maria’s demand curve for bread, what other set of information do we need? Group of answer choices: whether her bread consumption goes up or down with price how much bread she buys in total how much bread she buys at each price point whether or not she switches to a substitute when the price is high
Which of the ff. is correct with regards to the demand curve? A. If the price of the good increases, the demand curve for the good will shift to the left B. If the price of the good increases, the consumers have the incentive to look for substitutes, thus, the quantity demanded and its price are inversely related C. Income of the consumers is written on the vertical axis D. Varying preferences of the consumers is reflected in the demand curve and is written on the horizontal axis
1. A) When it comes to the level of utility that can be attained along an individual demand curve, which of the following is true? Group of answer choices a-the level of utility increases as the price of the product falls b-the level of utility decreases as the price of the product falls c-the level of utility increases as the price of the product rises d-the level of utility stays constant always B) From a price-consumption curve, we can obtain: Group of answer choices a-points required to demonstrate a shift in a demand curve b-points required to create a downward sloping market demand curve c-points required to construct a downward sloping demand curve d-an income-consumption curve. C) Which of the following claims is true at each point along a price-consumption curve? Group of answer choices a-Utility is maximized, and all income is spent. b-Utility is maximized but income is not all spent. c-The level of utility is constant. d-All income is spent, but utility…
Explain the impact of each of the following scenarios on only the market for apples in Gauteng. >state whether each of the following scenarions will impact the demand or supply cirves for apples > state whether the impact will shift the curve or cause a movement along a curve > if is is a shift, state the direction of the shift and motivate your answer Q2..1 Eating apples is considered unhealthy ,ceteris paribus. Q2.2 The number of firms selling apples in Gauteng has decreased.
11) Assume Gloria is initially in equilibrium and that X and Y are normal goods for her. Then the price of X falls. For Gloria to move to a new equilibrium point her consumption ofA) X must decrease.B) X must remain constant, but her consumption of Y must decrease.C) X must increase.D) both X and Y must decrease.
Andre has a salary of $1000. He spends his entire budget on shoes and beers. The cost for a pair of shoes is $15 and the cost for can of beer is $25. a.Construct Andre’s budget constraint (place) beers on the y-axis. b.Suppose Andre’s salary rises by 25%. Also suppose that the price of shoes and beers each rise by 40%. Construct Andre’s new budget constraint. What is the difference between the new and old budget constraints? c.Suppose that the price of beers fell from $25 per beer to $15. Construct Andre’s new budget constraint. What is the difference between the new and old budget constraints.
Given the following situations, determine the effect on Qd or D or Qs or S for electric cars. Write ↑ Qd, ↓ Qd, ↑ D, ↓ D, ↑ Qs, ↓ Qs, ↑ S, ↓ S or no effect. For each answer, graphically illustrate using the corresponding demand curve or supply curve. Show graphical table. Label properly: Assume that this is a normal good, the income of the consumers increased. Reduction of charging stations and infrastructures for electric vehicles. Stricter regulations or compliance requirements for electric vehicle production.
Suppose a consumer’s utility function is given by U(X,Y) = X1/2*Y1/2. Also, the consumer has $72 to spend, the price of Good X, PX = $1, and the price of Good Y, PY = $1. Now suppose PX increases to $9 a)Of the total change in the quantity demanded of Good X, how much is due to the substitution effect and how much is due to the income effect? (Note: since there is an increase in the price of Good X, these values will be negative). b) On a piece of paper, draw on a graph the original budget constraint new budget constraint compensated budget constraint Also, on your graph, indicate the optimal bundle on each budget constraint. Label the optimal bundle on the original budget constraint X* and Y* Label the optimal bundle on the new budget constraint X** and Y** Label the optimal bundle on the compensated budget constraint XCand YC