Question

7. Suppose an increase in the world price of corn is sustained throughout a long time period. The supply of corn over time will likely, a. become more elastic because consumers have more choices over longer time horizons. b. become more elastic because it takes corn a relatively long amount of time to mature from planting to harvest. c. become less elastic (more inelastic) because consumers have fewer choices over longer time horizons. d. become less elastic (more inelastic) because increasing the amount of corn produced is harder over a longer time horizon. 8. In their paper, "Income Elasticities for Beef, Pork, and Poultry: Changes and Implications", Michael Hudson and Joseph Vertin found that in U.S. food markets, the income elasticity of demand for beef was positive from 1960-1976, but negative during the next decade. This type of change is not abnormal, in that as average household incomes rise, preferences might change. Assuming you are a beef producer in 1983, what will happen if incomes continue to increase? a. The marginal cost of beef will increase. b. The marginal cost of beef will decrease. c. The demand for beef will increase. d. The demand for beef will decrease. 9. According to a 2001 article in the Wall Street Journal, unlike airlines, even elite hotels don't have sophisticated systems that can react quickly to changes in demand. Even if they could, many hoteliers say people don't respond that much to lower rates. "We've tested this, cutting our rates by $50 (per night], and we didn't see an appreciable response in occupancy," says Jim Schultenover, a vice president for Ritz-Carlton. This quote implies that the price demand for hotels is, a. Elastic. b. Unit elastic. c. Inelastic. d. The quote relates to the elasticity of supply and not demand.

Answer 1

Answer 7 - Option A

Becomes more elastic as the consumers have more choices over the long term horizons.

In the long term the consumers have the tendency to search for the substitutes of the products which they feel to stop consuming because of certain reasons.

The data regarding the harvest time has not been given hence the elasticity cannot be predicted through that . The demand will become more elastic and not less elastic. Hence options B, C, D are wrong.

Answer 8 - Option D

The demand for the beef will decrease.

As in the decade of 1976-1986 the income elasticity was negative , hence the increase in the income of the consumer will have an opposite effect on the demand and the demand will decrease.

It has nothing to do with the cost of the beef because income elasticity is the other than price factor. Hence all other options will be wrong.

Answer 9 - Option C

Inelastic.

As per the given situation the demand of the people is not changing in response to the change in the price of the rooms . Hence this type of demand is said to be inelastic .

The quote is not related to the supply of the rooms , and the demand is inelastic and not elastic or unit elastic , hence all other options will be wrong.