QUESTION 1
You still produce Coco cola beverages drinks. Currently, the Market price is $2.50 per 20-ounce can. You estimate that the price elasticity of demand is 2.7 (in absolute value). If there is a decrease in supply due to a $1.00 per can increase in costs, then you predict:
A relatively___________________change in quantity demanded and a relatively______________change in price.
QUESTION 2
Tom and you are stranded in the backwoods. You can trap beavers or hunt elk. Tom needs 60 minutes to trap a beaver and 90 minutes to kill an elk. You need 20 minutes to trap a beaver and 60 minutes to kill an elk. What should the two of you do?
larger
smaller
since elasticity of demand is 2.7, demand is elastic, it means buyers are responsive to changes in price. So decrease in supply results in larger decrease in quantity demanded and smaller increase in price.
-------
Tom's opportunity cost of trapping= 60/90= 0.67
Your opportunity cost of trapping= 20/60=0.33
Since you have lower opportunity cost of trapping, you should trap beaver and Tom should kill elk.
QUESTION 1 You still produce Coco cola beverages drinks. Currently, the Market price is $2.50 per...
You produce Coco cola beverages. You estimate that the price elasticity of demand for your product is 2.7 (in absolute value). Coco cola currently sells for $2.50 per 20-ounce can. Some legislators are considering placing a $1.00 per can tax on your product. The OWL will be relatively ---------------------------- Tax revenue will be relatively ------------------------------------- Given the price elasticity of demand, your burden of the tax is likely to be relatively -_______________
You produce Coco cola beverages. You estimate that the price elasticity of demand for your product is 2.7 (in absolute value). Coco cola currently sells for $2.50 per 20-ounce can. Some legislators are considering placing a $1.00 per can tax on your product.(the answer should be a few words) 1-The DWL will be relatively 2-Tax revenue will be relatively 3-Given the price elasticity of demand, your burden of the tax is likely to be relatively
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