Answer the following questions completely and fully.  Show your work.

(1) If there is a 10% increase in the price and 8% decrease in the quantity demand, then the price elasticity of demand is what? Is it elastic or Inelastic? How do you know this?


(2) If the price elasticity of soap is 2.5, and if the price goes up from $2.00 to $2.50, what will be the effect on the demand for soap?  Hint:  Calculate the percentage change in price and then plug into the elasticity formula:  E = %change in quantity demand / % change in price.  
 

(3) If the price elasticity of supply for oranges is 0, then what does that mean?  Hint:  the question is looking for the supply elasticity and NOT the elasticity of demand.  
 

(4) What is the price elasticity of demand for pizza, the parlor lowered the price from $10 to $8 and the demand went up from 60 orders to 80 orders per night? And if demand for Chinese food drops from 90 to 80, what is the relations between the two meals, the pizza and Chinese food?
 

(5)  If the Income elasticity of demand for a good is 2.5 and the price elasticity of demand is 0.6, what does that mean about the product?  Decribe what kind of product could be?  

(6)  If a business raises their prices and the total revenues for the business decrease, then what part of the demand curve is the business in?  What advice would you give that business?

(7)  An income elasticity of demand equal to 2 for a particular product means that:   A. demand curves for the product slope upward.   B. the product is an inferior good.   C. a 10 percent increase in income will yield a 20 percent increase in the quantity sold. D. a 20 percent increase in income will result in a 10 percent increase in the quantity sold.   E. (% change in Q) / (% change in P) = 2.

 

 

 

 

 

(8)

Price
Quantity Demanded
Quantity Supplied
$7
200
50
$8
180
90
$9
150
150
$10
110
210
$11
60
250
Calculate the price elasticity of demand when the price goes from $10 to $9 and calculate the price elasticity of supply when the price goes from $8 to $11? 

(9)  

Qty      Wraps Total Utility        Qty       Tea Total Utility 
1                  60                          1         40
2              102                            2         70
3              132                             3         91
4              144                            4         106
5              144                            5          112
6                138                          6          115
7                128                          7           115
Keegan has $30 to spend on Wraps and Ice Tea. The price of a Wrap is $6 and the price of a glass of Ice Tea
is $3. The Table shows his total utility from different quantities of the two items.   What is the optimal Mix of the two purchases which will make the consumer most happy (max. Utility) and still within the budget. 

(10)  What if the Marginal utility is sloping steeply downward for ice cream, what does that mean about the buyer's preference for ice cream? if slope is close to flat?

(11) Why is it that we get diminishing returns, but also the more that we do something, the better we get at it? How can these two things happen? Is there a conflict here?
 

(12) Why do consumers make a choice by looking at Both the Marginal Utility (MU) and the price, like MU/P for a product, rather than just the price or just the Marginal Utility (MU) of it? Explain.
 

(10) If the MU of the product is high, than what can you say about the (1) the shape of the price elasticity of demand for that product and (2) how high will the price be likely to go? Explain.

SmartExpert

(118)

Status NEW Posted 03 Aug 2017 04:08 AM My Price 10.00

Pro-----------ble-----------m S-----------et -----------4-----------

Attachments

file 1501739404-Problem Set 4.docx preview (1186 words )

----------- ----------- ----------- ----------- ----------- Pr-----------obl-----------em -----------Set----------- 4 ----------- Pr-----------ofe-----------sso-----------r -----------Nam-----------e -----------Dat-----------e ----------- -----------Ans-----------wer----------- th-----------e f-----------oll-----------owi-----------ng -----------que-----------sti-----------ons----------- co-----------mpl-----------ete-----------ly -----------and----------- fu-----------lly-----------. ----------- Sh-----------ow -----------you-----------r w-----------ork-----------. -----------(1)----------- If----------- th-----------ere----------- is----------- a -----------10%----------- in-----------cre-----------ase----------- in----------- th-----------e p-----------ric-----------e a-----------nd -----------8% -----------dec-----------rea-----------se -----------in -----------the----------- qu-----------ant-----------ity----------- de-----------man-----------d, -----------the-----------n t-----------he -----------pri-----------ce -----------ela-----------sti-----------cit-----------y o-----------f d-----------ema-----------nd -----------is -----------wha-----------t? -----------Is -----------it -----------ela-----------sti-----------c o-----------r I-----------nel-----------ast-----------ic?----------- Ho-----------w d-----------o y-----------ou -----------kno-----------w t-----------his-----------?In-----------ela-----------sti-----------c, -----------the----------- pr-----------ice----------- el-----------ast-----------ici-----------ty -----------of -----------dem-----------and----------- is----------- 0.-----------8. -----------You----------- kn-----------ow -----------thi-----------s i-----------s i-----------nel-----------ast-----------ic -----------bec-----------aus-----------e t-----------he -----------(% -----------cha-----------nge----------- in----------- qu-----------ant-----------ity-----------) (-----------8%)----------- / -----------(% -----------cha-----------nge-----------

Not Rated(0)

• Buy Answer