Microeconomics
5th Edition
ISBN: 9781118572276
Author: David Besanko
Publisher: WILEY
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Chapter 2, Problem 2.12P
To determine
(a)
To draw:
Perfectly inelasticdemand curve
To determine
(b)
Toascertain:
The effect on
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Suppose that you are a staff economist with an economic consulting firm. The operator of a local harbour has commissioned your firm to do a market analysis of the demand for berths (parking spaces) for boats. Your firm finds that the price elasticity of demand for berths is –0.8.
If the price of a berth in the area decreases by 6%, how will the quantity of berths that people demand change? The number of berths demanded will:
Increase by 0.8%
Decrease by 7.5%
Increase by 6%
Increase by 4.8%
Can it be possible that for a particular product the demand curve is perfectly inelastic, regardless of price? Explain your answer in detail.
Consider the markets for widgets and cogs. You study survey data and observe that if widgets cost $5, then 100 widgets are demanded. You also observe that if widgets cost $3, then 150 cogs are demanded and if widgets cost $4 then 100 cogs are demanded. Given the information, determine and explain which types of elasticity of demand you are able to calculate, and then calculate using the two types of methods to calculate elasticity of demand. After calculating, please interpret the calculations.
Chapter 2 Solutions
Microeconomics
Ch. 2 - Prob. 1RECh. 2 - Prob. 2RECh. 2 - Prob. 3RECh. 2 - Prob. 4RECh. 2 - Prob. 5RECh. 2 - Prob. 6RECh. 2 - Prob. 7RECh. 2 - Prob. 8RECh. 2 - Prob. 9RECh. 2 - Prob. 10RE
Ch. 2 - Prob. 2.1PCh. 2 - Prob. 2.2PCh. 2 - Prob. 2.3PCh. 2 - Prob. 2.4PCh. 2 - Prob. 2.5PCh. 2 - Prob. 2.6PCh. 2 - Prob. 2.7PCh. 2 - Prob. 2.8PCh. 2 - Prob. 2.9PCh. 2 - Prob. 2.10PCh. 2 - Prob. 2.11PCh. 2 - Prob. 2.12PCh. 2 - Prob. 2.13PCh. 2 - Prob. 2.14PCh. 2 - Prob. 2.15PCh. 2 - Prob. 2.16PCh. 2 - Prob. 2.17PCh. 2 - Prob. 2.18PCh. 2 - Prob. 2.19PCh. 2 - Prob. 2.20PCh. 2 - Prob. 2.21PCh. 2 - Prob. 2.22PCh. 2 - Prob. 2.23PCh. 2 - Prob. 2.24PCh. 2 - Prob. 2.25PCh. 2 - Prob. 2.26PCh. 2 - Prob. 2.27PCh. 2 - Prob. 2.28PCh. 2 - Prob. 2.29PCh. 2 - Prob. 2.30P
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- Consider the demand for shrimp shown in Figure 2. Suppose the current demand for shrimp is D (in black), the current price of a pound of shrimp is $10, and the current quantity demand of shrimp is 200K. Which of the following correctly describes an increase in the demand for shrimp, assuming the price of a pound of shrimp remains at $10? A) The demand curve for shrimp shifts right from D to D' (blue), and the quantity demand for shrimp decreases from 200K pounds to 150K pounds. B) The demand curve for shrimp shifts left from D to D'' (red), and the quantity demand for shrimp decreases from 200K pounds to 150K pounds. C) The demand curve for shrimp shifts right from D to D' (blue), and the quantity demand for shrimp increases from 200K pounds to 270K pounds. D) The demand curve for shrimp shifts left from D to D'' (red), and the quantity demand for shrimp increases from 200K pounds to 270K pounds.arrow_forwardPharmaceutical drugs have an inelastic demand and computers have an elastic demand. suppose that technological advance doubles the supply of both product. what happens to the equilibrium price and quantity in each market?arrow_forwardConsider the demand for shrimp shown in Figure 2. Suppose the current demand for shrimp is D (in black), the current price of a pound of shrimp is $10, and the current quantity demand for shrimp is 200K. Which of the following correctly describes a decrease in the demand for shrimp, assuming the price of a pound of shrimp remains at $10? A) The demand curve for shrimp shifts right from D (black) to D' (blue), and the quantity demand for shrimp decreases from 200K pounds to 150K pounds. B) The demand curve for shrimp shifts left from D (black) to D'' (red), and the quantity demand for shrimp decreases from 200K pounds to 150K pounds. C) The demand curve for shrimp shifts right from D (black) to D' (blue), and the quantity demand for shrimp increases from 200K pounds to 270K pounds. D) The demand curve for shrimp shifts left from D (black) to D'' (red), and the quantity demand for shrimp increases from 200K…arrow_forward
- The demand for hamburgers is given by Qd=10-p and the supply is Qs=4p-10, where pd and ps are, respectively the price paid by demanders and the price received by suppliers. A: Draw the demand and supply functions. What is the price-elasticity of demand? What is the price-elasticity of supply? B: Find the equilibrium quantity and price, and show them on the graph. C: Suppose due to the rising health awareness the demand decreases to Q d=5-p. Find the new equilibrium prices and quantity, and show them on the graph. D: Suppose that the demand and supply are as before, i.e. Qd=10-p and Qs=4p-10, but now the government imposes a quantity tax on the suppler at the rate of 1 per unit of the quantity. What quantity will be sold and what price? E: In part d), what is the total amount of tax collected by the government? How this tax amount is divided between the demanders and supplier? Who pays more and why? Explainarrow_forwardThe demand for hamburgers is given by Qd=10-p and the supply is Qs=4p-10, where pd and ps are, respectively the price paid by demanders and the price received by suppliers. A: Draw the demand and supply functions. What is the price-elasticity of demand? What is the price-elasticity of supply? B: Find the equilibrium quantity and price, and show them on the graph. C: Suppose due to the rising health awareness the demand decreases to Q d=5-p. Find the new equilibrium prices and quantity, and show them on the graph. D: Suppose that the demand and supply are as before, i.e. Qd=10-p and Qs=4p-10, but now the government imposes a quantity tax on the suppler at the rate of 1 per unit of the quantity. What quantity will be sold and what price? E: In part d), what is the total amount of tax collected by the government? How this tax amount is divided between the demanders and supplier? Who pays more and why? Explainarrow_forwardConsider two markets: the market for motorcycles and the market for pancakes. The initial equilibrium for both markets is the same, the equilibrium price is $4.50, and the equilibrium quantity is 29.0. When the price is $7.75, the quantity supplied of motorcycles is 65.0 and the quantity supplied of pancakes is 103.0. For simplicity of analysis, the demand for both goods is the same. Using the midpoint formula, calculate the elasticity of supply for pancakes. Please round to two decimal places.arrow_forward
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Elasticity of Demand- Micro Topic 2.3; Author: Jacob Clifford;https://www.youtube.com/watch?v=HHcblIxiAAk;License: Standard YouTube License, CC-BY