Microeconomics (MindTap Course List)
10th Edition
ISBN: 9781285859484
Author: William Boyes, Michael Melvin
Publisher: Cengage Learning
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Question
Chapter 6, Problem 8E
To determine
(a)
Income elasticity and the reason because of which it is positive.
To determine
(b)
Changes in demand curve when income elasticity is 2.0 and 0.2.
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Need number 4 and 5 answered
Elasticity:
What is elasticity? Elasticity refers to the concept that provide information about the sensitivity or responsiveness of one variable to another.
What is Price Elasticity of Demand? Price elasticity of demand is the responsiveness of consumers in term of quantity demanded with respect to the price change. It explains that how much quantity demanded changes with the change in the price by 1percent.
What is the formula that we will use to calculate it? The formula to calculate price elasticity of demand would be: =Percentage change in quantity demanded/percentage change in price
After calculating the Coefficient of Price Elasticity of Demand, what are the rules we use to characterize that price range? (i.e., What importance does the number one play?)
What is the total revenue test?
When the price of a bar of chocolate is $1.00, the quantity demanded is 100,000 bars. When the price rises to $1.50, the quantity
demanded falls to 60,000 bars. Calculate the price elasticity of demand using the mid-point method.
Instructions: Round your answers to two decimal places. Include a negative sign if necessary.
a. Suppose the price increases from $1.00 to $1.50.
The price elasticity of demand is
b. Suppose the price decreases from $1.50 to $1.00.
The price elasticity of demand is
c
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Similar questions
- Suppose that your demand schedule for pizza is as follows: a. Use the midpoint method to calculate your price elasticity of demand as the price of pizza increases from 8 to 10 if (i) your income is 20,000 and (ii) your income is 24,000. b. Calculate your income elasticity of demand as your income increases from 20,000 to 24,000 if (i) the price is 12 and (ii) the price is 16.arrow_forwardWhat does a price elasticity of demand of 0.39 mean?arrow_forwardJills Sausage Dog Stand projects the following demand for Jills sausage dogs: a. Calculate the price elasticity of demand between 2 and 4. Is demand in this range elastic or inelastic? b. Calculate the price elasticity of demand between 4 and 6. Is demand in this range elastic or inelastic?arrow_forward
- (Other Elasticity Measures) Complete each of the following sentences: a. The income elasticity of demand measures, for a given price, the __________ in quantity demanded divided by the __________ income from which it resulted. b. If a decrease in the price of one good causes a decrease in demand for another good, the two goods are __________. c. If the value of the cross-price elasticity of demand between two goods is approximately zero, they are considered __________.arrow_forwardIf the elasticity of demand for hamburgers equals 21.5 and the quantity demanded equals 40,000, predict what will happen to the quantity demanded of hamburgers when the price increases by 10 percent. If the price falls by 5 percent, what will happen?arrow_forwardThe equation for a demand curve is P=483Q. What is the elasticity in moving from quantity of 5 to a quantity of 6?arrow_forward
- Plot the price and quantity data given in the demand schedule of exercise 1. Put price on the vertical axis and quantity on the horizontal axis. Indicate the price elasticity value at each quantity demanded. Explain why the elasticity value gets smaller as you move down the demand curve.arrow_forwardThe quantity supplied of a good rises from 120 to 140 as price rises from 4 to 5.50. What is the price elasticity of supply of the good?arrow_forwardOver time, technological advance increases consumers incomes and reduces the price of smartphones. Each of these forces increases the amount consumers spend on smartphones if the income elasticity of demand is greater tha____________ and if the price elasticity of demand is greater than_____________. a. zero, zero b. zero, one c. one. zero d. one, onearrow_forward
- What is the formula for line cross-price elasticity of demand?arrow_forwardCompute the elasticity values. State the degree of elasticity and the nature of the goods.1. An increase in the price of Good Y from $5.00 to $6.00 causes the demand for Good X to decrease from 1000 units to 700 units.2. An increase in income from $3000 to $4000 causes the demand for chicken to increase from 6 to 7 kilos.3. The equation for a demand curve is P = 48 – 3Q. What is the elasticity in moving from a quantity of 5 to a quantity of 6?4. The equation for a supply curve is P = 3Q – 8. What is the elasticity in moving from a price of 4 to a price of 7?arrow_forwardCompute the elasticity values. State the degree of elasticity and the nature of the goods.1. An increase in the price of Good Y from $5.00 to $6.00 causes the demand for Good X to decrease from 1000 units to 700 units.2. An increase in income from $3000 to $4000 causes the demand for chicken to increase from 6 to 7 kilos.3. The equation for a demand curve is P = 48 – 3Q. What is the elasticity in moving from a quantity of 5 to a quantity of 6?4. The equation for a supply curve is P = 3Q – 8. What is the elasticity in moving from a price of 4 to a price of 7?arrow_forward
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