Homework Answers
We know substitute goods have positive cross price elasticity of demand because an increase in price of 1 good will decrease the demand of good 1 and will increase the demand of good 2.
Thus E and F are close substitutes because E and F has positive price elasticity and it is highly elastic because of close substitutes.
Thus ans is C
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Consider the cross-price elasticities of demand for four pairs of goods: For goods A & B,...
5. The cross-price elasticity of demand between good A and good B is -1.4. These goods...
5. The cross-price elasticity of demand between good A and good B is -1.4. These goods are: A. Complements B. Substitutes C. Unrelated Goods D. Inelastic Goods 6. Income elasticity of demand for streaming video is 0.5, which indicates that streaming video is a: A. Normal good B. Inferior good C. Not good D. Can't say for sure 7. When the price of sriracha increases by 15%, you observe quantity supplied increase by 25%. Elasticity of supply is: A. 0.6...
The table shown lists two goods along with their cross-price elasticities, where the percentage change in...
The table shown lists two goods along with their cross-price elasticities, where the percentage change in quantity is measured for Good 1 and the percentage change in price is for Good 2. Identify the relationship between each of the pairs of goods. Good 1 Good 2 Cross-price elasticity of demand Relationship air-conditioning units electricity −0.38 Coca-Cola Pepsi +0.67 coffee creamer −0.25 McDonald's burgers In-N-Out burgers +0.82 mystery good A mystery good B +1.57 Answer Bank substitutes complements normal no relationship...
1. Elasticities Consider the following supply and demand functions qD12-3p s3+2p a) Plot the supply and...
1. Elasticities Consider the following supply and demand functions qD12-3p s3+2p a) Plot the supply and demand function:s b) What are the equilibrium price and quantity? c) At the equilibrium price and quantity, what is the price elasticity of demand? d) Interpret the price elasticity of demand. How much will quantity change if the price increases by 1%? e) Suppose I were to calculate an income elasticity of ξ 0.5. What does this imply about the good in our market?...
1. Elasticities Consider the following supply and demand functions AD = 16-4p Is2 +5p a) Plot the supply and demand...
1. Elasticities Consider the following supply and demand functions AD = 16-4p Is2 +5p a) Plot the supply and demand functions. b) What are the equilibrium price and quantity? c) At the equilibrium price and quantity, what is the price elasticity of demand? d) Interpret the price elasticity of demand. How much will quantity change if the price increases by 1%? e) Suppose I were to calculate an income elasticity of 0.1. What does this imply about the good in...
For the following pairs of goods, would you expect the cross-price elasticity of demand to be...
For the following pairs of goods, would you expect the cross-price elasticity of demand to be positive, negative, or zero? Briefly explain. a) Peanut Butter and Jelly b) Shoes and sandals c) Orange Juice and Apple Juice d) Televisions and DVD players e) T-shirts and gasoline
The income elasticities of Products A & B and their cross price elasticities with respect to...
The income elasticities of Products A & B and their cross price elasticities with respect to Product Care: Income Elasticity Cross Price Elasticity Product A +1.9 -3.1 Product B -0.8 +0.5 Product A is normal, Product B is inferior, Product A is a complement to Product C, and Product B is a substitute for Product C. Product A is normal, Product B is inferior, Product A is a substitute for Product C, and Product B is a complement to Product...
7. For the following pairs of goods, would you expect the cross-price elasticity of demand to...
7. For the following pairs of goods, would you expect the cross-price elasticity of demand to be positive, negative, or zero? Briefly explain. a) Peanut Butter and Jelly b) Shoes and sandals c) Orange Juice and Apple Juice d) Televisions and DVD players e) T-shirts and gasoline
1. Acer faces demand for its laptops characterized by the following elasticities: Own-price elasticity = -1...
1. Acer faces demand for its laptops characterized by the following elasticities: Own-price elasticity = -1 Cross-price elasticity with the operating system = -5 Income Elasticity = 1.5 Respond to each of the following statements with True or False and an explanation. Use mathematical analysis and/or graphs where helpful. a. A price reduction for laptops will increase both the number of units sold and the revenue of Acer. b. The cross-price elasticity indicates that a 5% reduction in the price...
26)What pair of goods is likely to have the largest cross-price elasticity in absolute value? Multiple...
26)What pair of goods is likely to have the largest cross-price elasticity in absolute value? Multiple Choice a)Ramen noodles and a Rolex watch b)Cross-price elasticity is always negative, and simply reported in absolute value. c)Butter and margarine d)Peanut butter and jelly 27)If the price of butter increases 5 percent and the amount of margarine purchased increases 25 percent, then the cross-price elasticity of these goods is: Multiple Choice a)0.2. b)- 0.2. c)5. d)- 5. 28)The determinants of price elasticity of...
If goods are complements, then their O A. cross elasticities are positive. O B. income elasticities...
If goods are complements, then their O A. cross elasticities are positive. O B. income elasticities are negative. O C. income elasticities are positive. D. cross elasticities are negative.
5. The cross-price elasticity of demand between good A and good B is -1.4. These goods are: A. Complements B. Substitutes C. Unrelated Goods D. Inelastic Goods 6. Income elasticity of demand for streaming video is 0.5, which indicates that streaming video is a: A. Normal good B. Inferior good C. Not good D. Can't say for sure 7. When the price of sriracha increases by 15%, you observe quantity supplied increase by 25%. Elasticity of supply is: A. 0.6...
1. Elasticities Consider the following supply and demand functions qD12-3p s3+2p a) Plot the supply and demand function:s b) What are the equilibrium price and quantity? c) At the equilibrium price and quantity, what is the price elasticity of demand? d) Interpret the price elasticity of demand. How much will quantity change if the price increases by 1%? e) Suppose I were to calculate an income elasticity of ξ 0.5. What does this imply about the good in our market?...
1. Elasticities Consider the following supply and demand functions AD = 16-4p Is2 +5p a) Plot the supply and demand functions. b) What are the equilibrium price and quantity? c) At the equilibrium price and quantity, what is the price elasticity of demand? d) Interpret the price elasticity of demand. How much will quantity change if the price increases by 1%? e) Suppose I were to calculate an income elasticity of 0.1. What does this imply about the good in...
The income elasticities of Products A & B and their cross price elasticities with respect to Product Care: Income Elasticity Cross Price Elasticity Product A +1.9 -3.1 Product B -0.8 +0.5 Product A is normal, Product B is inferior, Product A is a complement to Product C, and Product B is a substitute for Product C. Product A is normal, Product B is inferior, Product A is a substitute for Product C, and Product B is a complement to Product...
7. For the following pairs of goods, would you expect the cross-price elasticity of demand to be positive, negative, or zero? Briefly explain. a) Peanut Butter and Jelly b) Shoes and sandals c) Orange Juice and Apple Juice d) Televisions and DVD players e) T-shirts and gasoline
If goods are complements, then their O A. cross elasticities are positive. O B. income elasticities are negative. O C. income elasticities are positive. D. cross elasticities are negative.
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