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1) At what price does Shortage and Surplus occur? Once a market has shortage and surplus, then what happens to the market price?
2) If a decrease in demand is smaller than a decrease in supply, what happens to an
3) If Coke prices go down, what happens to Pepsi demand? Why?
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- 13. The table below gives part of the supply schedule for personal computers in the United States. Price Quantity Supplied before tech change Quantity Supplied after tech $1,100 $900 12,000 8,000 change 13,000 9,000 a) Calculate the price elasticity of supply when price rises from $900 to $1,100 using the arc elasticity formula (the midpoint method). b) Now suppose that technology changes such that at every price, 1000 more computers are supplied. Now, as prices rise from $900 to $1,100, is the elasticity of supply smaller than, larger than, or equal to the elasticity in part a)? c) Does the change in b) change the slope of the supply curve? Are slope and elasticity the same thing? Explain.9) Suppliers of computer disks should ___________ the price of disks to increase their total revenue if they know that the demand for computer disks is _______. a) decrease, elastic b) increase, elastic c) decrease, inelastic d) increase, elastic or inelastic1. Calculate the elasticity of demand for the demand curve p = 100-2q at each of the following price and quantity levels and determine the type of elasticity: a p = 90 and q=2 b. p = 50 and q= 10 &p=5 and q = 19 2. Suppose you are given the following information: Q³= 200 + 3P Qd = 400 - P where Q is the quantity supplied, Qis the quantity demanded and P is price. From this information compute equilibrium price and quantity. Now suppose that a tax is placed on buyers so that Qd = 400 - (2P+T) where T is taxes. IfT= 20, solve for the new equilibrium price and quantity. (Note: You are solving for the equilibrium price for sellers and buyers). hp
- 12. What is the difference between a change in supply and a change in quantity supplied? A (change in supply) or to the right (an increase in supply). A change in supply, therefore, is a change in the entire supply schedule or curve. ) is a shift in the entire supply curve either to the left (a decrease in In contrast, a ( change in schedule from one price-quantity combination to another. A change in product price causes the change in quantity supplied. ) is a movement along an existing supply curve or PA P (Increase, Decrease) in (Increase, Decrease) inIf the coefficient of supply elasticity is 2, what must happen to housing prices to cause builders to expand the quantity of housing supplied by 30 percent? Housing prices must rise by 60 percent. Housing prices must rise by 15 percent. O Housing prices must fall by 15 percent. O Housing prices must rise by 6 percent. Housing prices must fall by 6 percent.13) . Consider the following supply schedule for shoes. Price Quantity Supplied $5 425 $10 445 $15 465 $20 485 $25 505 $30 525 $35 545 $40 565 Suppose that the price of shoes increases from $25 to $30. Using the mid-point approach, calculate price elasticity of supply.
- 1. When the price of ground beef increases and all else is held constant, we would expect the supply of hamburgers to causing the price to Group of answer choices stay the same; stay the same increase; decrease decease; decrease increase; increase decrease; increase When firms in a market expect the price of their products to rise, the supply curve of their goods equilibrium price to 2. causing the Group of answer choices increases; rise and the equilibrium quantity to fall decreases; rise increases, fall. decreases; fall increases; rise 3. The change in an equilibrium value is sometimes indeterminate due to the fact that Group of answer choices supply always shifts less than demand. both supply and demand may increase or decrease by equal amounts. both supply and demand may not change. it is possible for demand to increase or decrease more than supply increases or decreases. demand always shifts less than supply.Your firm receives revenue of $40MM per year from Product A and $90MM per year from Product B. The own- price elasticity of demand for Product A is -1.5. The cross-price elasticity of demand between Product A and Product B is -1.8. Suppose you increase the price of Product A by two percent: a. How much will Product A’s revenue change? b. How much will Product B’s revenue change?5) Calculate the arc price elasticity of demand for wheat in the two situations below: Farmer Brown's Wheat Old price; $3.40/bu Old quantity; 28,000 bu The Wheat Market Old price; $3.40/bu Old quantity; 2.5 billion bu New price; $3.20/bu New price; $3.20/bu New quantity; 2.525 billion bu New quantity; 35,000 bu Can you account for the difference in elasticities?
- 23. Using the production possibilities table below, please answer the following question: Type of Production Schools Missiles Type of Production Schools Missiles A 0 16 A 0 16 Production Alternatives If the economy were at point D, what would be the opportunity cost of building 4 more schools? 24. Using the production possibilities table below, please answer the following question: B 4 15 B 4 15 Production Alternatives C 8 12 с 8 12 D 12 7 E 16 0 D 12 7 If the economy were at point D, what would be the opportunity cost of building one more missile? Please show your calculation for full points. E 16 01. Consider the market for Widgets. Suppose that the equation for the supply curve is: Qs = 1,000P – 10,000, and the equation for the demand curve is: Qa = 50,000 – 2,000P. It turns out that the equilibrium price is 20, while the equilibrium quantity is 10,000. a. Use a 10% increase in quantity to estimate (crudely) both the elasticity of supply and the elasticity of demand at the equilibrium quantity. i) Categorize supply and demand as elastic or inelastic at the equilibrium quantity. ii) Is supply or demand relatively more inelastic at the equilibrium quantity? b. If the government enacted a tax of $3, the loss in consumer surplus would be 9,000, while the loss in producer surplus would be 18,000 (see Homework 2, question #2.) Compare this information to your answer to part (a). Explain. c. Now estimate (crudely) the elasticity of demand at a quantity of 11,000 by decreasing quantity by 1,000. Compare your estimate of elasticity to the estimate in part (a). Comment.QUESTION 7 The demand for rubber erasers consists of two components. The first component is the demand for rubber erasers by art students. This demand is given by QA = 19,500 - 325P. The second component is the demand for rubber erasers by all others. This demand is given by Qo = 32,000 - 2,000P. (a) What is the total quantity demanded of rubber erasers if the price of an eraser is: (i) $10 (ii) $15 (iii) $20 (iv) $30 (v) $70 (b) Assume that the supply of rubber erasers is given by Qs = 14,000+ 175P. (i) Find the equilibrium price and the equilibrium quantity. (ii) Calculate the total consumer surplus. [Hint: It may be easier if you calculate the consumer surplus for art students and the consumer surplus for all others separately, and then add them up.] (c) Assume that the supply of rubber erasers is given by Qs = 8,390 + 180P. Find the equilibrium price and the equilibrium quantity. 10 (DC) EN510
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