2. The accompanying table lists the S - price elasticities of demand for several goods, where the percent quantity change is measured for the first good of the pair, and the percent price change is measured for the second good. a. Explain the sign of each of the cross - price elasticities. What does it imply about the relationship between the two goods in question? b. Compare the absolute values of the cross - price elasticities and explain their magnitudes. For example, why is the cross - price elasticity of McDonald's burgers and Burger King burgers less than the cross - price elasticity of butter and margarine? c. Use the information in the table to calculate how a 5% increase in the price of Pepsi affects the quantity of Coke demanded. d. Use the information in the table to calculate how a 10% decrease in the price of gasoline affects Cross-price cross - Good elasticities of demand Air - conditioning units and kilowatts of electricity Coke and Pepsi High - fuel - consuming sport – utility vehicles (SUVS) and gasoline McDonald's burgers and Burger -0.34 +0.63 -0.28 +0.82 King burgers Butter and margarine +1.54

2. The accompanying table lists the S - price elasticities of demand for several goods, where the percent quantity change is measured for the first good of the pair, and the percent price change is measured for the second good. a. Explain the sign of each of the cross - price elasticities. What does it imply about the relationship between the two goods in question? b. Compare the absolute values of the cross - price elasticities and explain their magnitudes. For example, why is the cross - price elasticity of McDonald's burgers and Burger King burgers less than the cross - price elasticity of butter and margarine? c. Use the information in the table to calculate how a 5% increase in the price of Pepsi affects the quantity of Coke demanded. d. Use the information in the table to calculate how a 10% decrease in the price of gasoline affects Cross-price cross - Good elasticities of demand Air - conditioning units and kilowatts of electricity Coke and Pepsi High - fuel - consuming sport – utility vehicles (SUVS) and gasoline McDonald's burgers and Burger -0.34 +0.63 -0.28 +0.82 King burgers Butter and margarine +1.54

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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. Suppose a ticket to a Rolling Stones concert is $400 and at that price, the quantity of tickets demanded is 47,000 per concert. Using the midpoint method of calculating percentage changes, if the ticket price increases to $500 and the quantity demanded decreases to 46,000, what is the price elasticity of demand for Rolling Stones concert tickets? Referring to the above, which is greater -- the % change in quantity demanded or the % change in price? What will happen to total revenue (TR) when the price increases to $500? Briefly explain.
What is the cross price elasticity?
4-6 Suppose that the price of croissants rises from $2 to $3 per unit. Use the mid-point approach to get the elasticity. The quantity of orange juice purchased falls from 10 million bottles to 5 million bottles. What is the cross-price elasticity of demand between croissants and orange juice? Are they complements or substitutes? The quantity of jelly purchased increases from 10 million jars to 20 million jars. What is What is the cross-price elasticity of demand between croissants and orange juice? Are they complements or substitutes?
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