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: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 22, Problem 4CQ
To determine
The effects of tax in
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Daffy’s is a pet care company that recently increased the average price of its services by 5%. As a result, the number of customers dropped by 4%. How will this 5% increase of the average price of services impact total revenue at Daffy’s?
Consider the demand function for bicycles in South Florida:
Q = 24 + 3Y – 1.2P
where: Q is quantity demanded, Y is monthly income, and P is the price per unit.
If/when P = $54, and Y = $2,300,
(a) Find the quantity of bicycles that would be sold.
(b) Calculate the amount of the seller's total revenue.
(c) Compute the price-elasticity of demand (Ep) for bicycles.
(d) Interpret your result in (c).
(e) Compute the income-elasticity of demand (Ey) for bicycles.
(f) Interpret your result in (e).
In this problem, p is in dollars and q is the number of units.Suppose that the demand for a product is given by
(p + 7)
q + 6
= 1120.
(a) Find the elasticity when
p = $33.
(Round your answer to two decimal places.)(b) Tell what type of elasticity this is.
Demand is elastic.Demand is inelastic.
Demand is unitary.
(c) How would a price increase affect revenue?
An increase in price increases revenue.
An increase in price decreases revenue.
Revenue is unaffected by price.
Chapter 22 Solutions
Economics: Private and Public Choice (MindTap Course List)
Knowledge Booster
Similar questions
- Problem 04-06 At point A on the demand curve shown below, how will a 1 percent increase in the price of the product affect total expenditure on the product? Price (S/week) 7 6 5 4 3 2 1 Demand 0 2 4 6 8 10 12 14 16 18 20 Quantity (units/week) Instructions: Enter your response rounded to the nearest whole number. Total expenditure will (Click to select) by about [ %arrow_forwardHomework (Ch 05) On the following graph, use the green point (triangle symbol) to plot the weekly total revenue when the market price is $50, $75, $100, $125, $150, $175, and $200 per scooter. TOTAL REVENUE (Dollars) 7830 7290 6750 8210 5670 5130 4590 4050 3510 2970 0 25 50 75 100 125 150 175 200 225 250 275 300 325 PRICE (Dollars per scooter) Total Revenue gage Learning According to the midpoint method, the price elasticity of demand between points A and B is approximately Suppose the price of scooters is currently $25 per scooter, shown as point B on the initial graph. Because the demand between points A and B is a $25-per-scooter increase in price will lead to in total revenue per week. In general, in order for a price increase to cause a decrease in total revenue, demand must bearrow_forwardYour firm’s research department has estimated the income elasticity of demand for nonfed ground beef to be −1.94. You have just read in The Wall Street Journal that due to an upturn in the economy, consumer incomes are expected to rise by 10 percent over the next three years. As a manager of a meat-processing plant, how will this forecast affect your purchases of nonfed cattle?arrow_forward
- Your firm’s research department has estimated the income elasticity of demand for non fed ground beef to be -1.94. You have just read in the Wall Street Journal that due to an upturn in the economy, consumer incomes are expected to rise by 10 percent over the next three years. As a manager of a meat-processing plant, how will this forecast affect your purchases of non fed cattle?arrow_forwardPrice per Ice-cream (Rs.) Demand for Ice cream (Qd) Supply for Ice cream (Qs) 140 500 1500 120 750 1200 100 1000 1000 80 1250 750 60 1500 600 40 1750 300 What is the maximum price that consumer is willing to pay for 1500 bottles?arrow_forwardSuppose = 10,000-2P + 3P -4.5M, where P = $100, P = $50, and M (income) = $2,000. (a) What is the own x x y price elasticity of demand? Please show your calculations. (b) What is the cross price elasticity between good x and good Y? Please show your calculations. (c) What is the income elasticity of demand? Please show your calculations. Hint: For this question please look at the section "Obtaining Elasticities from Demand Functions" in Chapter 3 on pages 89 - 90 of the textbook 2. Suppose Qd=10,000-2 Px +3 Px-4.5M, where Px $100, Px = $50, and M (income) = $2,000. (a) What is the own price elasticity of demand? Please show your calculations. (b) What is the cross price elasticity between good X and good Y? Please show your calculations. (c) What is the income elasticity of demand? Please show your calculations. Hint: For this question please look at the section "Obtaining Elasticities from Demand Functions" in Chapter 3 on pages 89-90 of the textbookarrow_forward
- 4x + 500 10x +9 the number of plants sold per day when the price is x dollars per plant. A garden shop determines the demand function q = D(x) = (a) Find the elasticity. (b) Find the elasticity when x=3. (c) At $3 per plant, will a small increase in price cause the total revenue to increase or decrease? (a) The elasticity is during early summer for tomato plants where q is M Irarrow_forwardb) When the price is $166.10, the demand is (elastic/inelastic) which means that as price the revenue will (increases/decreases) (increase/decrease)arrow_forwardWhich determinant of demand changes in the personal computer market as more individuals become interested in "surfing the net"? a) Cost of factors of production b) Income c) Expectations or d) Number of buyersarrow_forward
- the demand equation for a product is q=1.5p+600, where q is the number of a products that can be sold in a month and p is the price per product. (a) what price will produce the largest revenue? (b) what is the largest monthly revenue?arrow_forwardThe following is a demand schedule for good Z. Price per unit (£) 10 15 20 25 30 Q demanded per week 30 25 15 10 (a) Plot the demand curve for good Z to show it is linear. (b) (i) Calculate price elasticity of demand (PED) for an increase in price from £5 to £10. Is demand elastic or inelastic? (ii) Calculate price elasticity of demand (PED) for an increase in price from £20 to £25. Is demand elastic or inelastic? (iii) Using your results of parts (i) and (ii), explain what happens to PED along a straight-line demand curve. (c) Explain, using diagrams, the relationship between price elasticity of demand and profits. E Please select file(s) Select file(s) 20arrow_forwardSuppose that Starbucks’s marketing department estimates the income elasticity of demand for its coffee to be 0.6. (a) Is Starbucks’s coffee a normal or inferior good? (b) Due to an economic recession, consumers’ incomes are expected to decrease by 3% over the next year. What is the expected percentage change in its coffee sales over the next year?’arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you