Q2. a. Explain why the price elasticity of demand is negative and why economists generally ignore the sign. b. Explain w...
Q2.
a. Explain why the price elasticity of demand is negative and why
economists generally ignore the sign.
b. Explain why the price elasticity of demand varies along a linear
downward sloping demand curve.
c. Explain why the income elasticity of demand for swimming pools
in Australia would be important for Australian swimming pool
manufacturers given:
i. A substantial decrease in Australian income tax rates
ii. A forecast recession
Homework Answers
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Q2. a. Explain why the price elasticity of demand is negative and why economists generally ignore the sign. b. Explain w...
Exercise 4.1: Price Elasticity of Demand The price of a good is $200, and the quantity...
Exercise 4.1: Price Elasticity of Demand The price of a good is $200, and the quantity demanded is 2,000. The price elasticity of demand is-1.25. If the price changes to $204, what is the new quantity demanded? Exercise 4.2: Income Elasticity of Demand A consumer's income is $40,000, and the quantity demanded of a good is 2,000. The income elasticity of demand is +0.60. If the consumer's income changes to $41,000, what is the new quantity demanded? Exercise 4.3: Income...
Distinguish the following and identify each with the appropriate formula; a. Price elasticity of demand b....
Distinguish the following and identify each with the appropriate formula; a. Price elasticity of demand b. Cross price elasticity of demand c. income elasticity of demand d. Why is elasticity of demand higher along a linear demand curve?
For each of the following cases, calculate the point price elasticity of demand, and state whether...
For each of the following cases, calculate the point price elasticity of demand, and state whether demand is elastic, inelastic, or unit elastic. The demand curve is given by QD = 5,000 – 50 PX a. If the price of the product is $50. b. If the price of the product is $75. 2) For each case, should the firm raise or lower the prices to maximize revenues? Why or Why not? Explain. 3) Suppose the income elasticity of demand...
Explain the cross-price elasticity of demand. Why is it negative or positive for certain types of...
Explain the cross-price elasticity of demand. Why is it negative or positive for certain types of goods?
a) Explain why the Demand Curve is downward-sloping (2 sentences max.) b) Under which circumstances do...
a) Explain why the Demand Curve is downward-sloping (2 sentences max.) b) Under which circumstances do we move up the supply curve as opposed to shifting the whole curve? (2 sentences max.) c) What is the difference between a "normal" and "inferior" good? For which demand shifter is this distinction particularly important? (3 sentences max.) d) State a good that you deem “inferior”. Briefly explain why (1 sentence max.). 1
(8 marks total) QUESTION 11 a) Why are both the price elasticity of demand and the price elasticity of supply likely to...
(8 marks total) QUESTION 11 a) Why are both the price elasticity of demand and the price elasticity of supply likely to be greater in the long run? (3 marks) b) Choose a good and draw both a demand and supply curve for that good. Explain and show how an increase in household income would affect the equilibrium price and quantity. (5 marks) QUESTION 12 A firm will continue producing in the short run even if it is making a...
a. Explain how price elasticity can be elicited through experimentation. Why is this likely to tell...
a. Explain how price elasticity can be elicited through experimentation. Why is this likely to tell you about a relatively small part of the demand curve you are interested in? b. Price is not the only factor that comes into play in determining how much of a product consumers will demand, and these other factors will need to be taken into account when a firm tries to forecast how much of a product it should aim to produce and sell....
Chapter overview 1. Reasons for international trade Resources reasons Economic reasons Other reasons 2. Difference between...
Chapter overview 1. Reasons for international trade Resources reasons Economic reasons Other reasons 2. Difference between international trade and domestic trade More complex context More difficult and risky Higher management skills required 3. Basic concept s relating to international trade Visible trade & invisible trade Favorable trade & unfavorable trade General trade system & special trade system Volume of international trade & quantum of international trade Commodity composition of international trade Geographical composition of international trade Degree / ratio of...
1. When it comes to financial matters, the views of Aristotle can be stated as:...
1. When it comes to financial matters, the views of Aristotle can be stated as: a. usury is nature’s way of helping each other. b. the fact that money is barren makes it the ideal medium of exchange. c. charging interest is immoral because money is not productive. d. when you lend money, it grows more money. e. interest is too high if it can’t be paid back. 2. Since 2008, when the monetary base was about $800 billion,...
Exercise 4.1: Price Elasticity of Demand The price of a good is $200, and the quantity demanded is 2,000. The price elasticity of demand is-1.25. If the price changes to $204, what is the new quantity demanded? Exercise 4.2: Income Elasticity of Demand A consumer's income is $40,000, and the quantity demanded of a good is 2,000. The income elasticity of demand is +0.60. If the consumer's income changes to $41,000, what is the new quantity demanded? Exercise 4.3: Income...
a) Explain why the Demand Curve is downward-sloping (2 sentences max.) b) Under which circumstances do we move up the supply curve as opposed to shifting the whole curve? (2 sentences max.) c) What is the difference between a "normal" and "inferior" good? For which demand shifter is this distinction particularly important? (3 sentences max.) d) State a good that you deem “inferior”. Briefly explain why (1 sentence max.). 1
(8 marks total) QUESTION 11 a) Why are both the price elasticity of demand and the price elasticity of supply likely to be greater in the long run? (3 marks) b) Choose a good and draw both a demand and supply curve for that good. Explain and show how an increase in household income would affect the equilibrium price and quantity. (5 marks) QUESTION 12 A firm will continue producing in the short run even if it is making a...
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