4. The following problems are based on the demand and supply schedule for gum listed below. All quantities are in millions of packs of gum per month. |Quantity Demanded 180 Price Quantity Supplied $0.20 30 60 90 $030 160 $0.40 140 $0.50 120 120 $0.60 100 140 $0.70 80 160 $0.80 60 180 a) Suppose that the quantity demanded rises by 40 million packs of gum per month at each price. b) Draw the initial demand and supply curves as given by the table above. Call this graph Graph 1. Label this demand curve D1, and this supply curve S1. Draw the new demand curve given by this change, labeling it D2. Show the new equilibrium price and output, labeling this point A. c) Suppose that the quantity supplied rises by 50 million packs per month at each price, while the quantities demanded retain their D1 values. On a new graph (labeled as Graph 2), draw D1, S1, and the new supply curve, S2. Show the new equilibrium output and price, labeling this point C.

4. The following problems are based on the demand and supply schedule for gum listed below. All quantities are in millions of packs of gum per month. |Quantity Demanded 180 Price Quantity Supplied $0.20 30 60 90 $030 160 $0.40 140 $0.50 120 120 $0.60 100 140 $0.70 80 160 $0.80 60 180 a) Suppose that the quantity demanded rises by 40 million packs of gum per month at each price. b) Draw the initial demand and supply curves as given by the table above. Call this graph Graph 1. Label this demand curve D1, and this supply curve S1. Draw the new demand curve given by this change, labeling it D2. Show the new equilibrium price and output, labeling this point A. c) Suppose that the quantity supplied rises by 50 million packs per month at each price, while the quantities demanded retain their D1 values. On a new graph (labeled as Graph 2), draw D1, S1, and the new supply curve, S2. Show the new equilibrium output and price, labeling this point C.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

1. Determinants of the price elasticity of demand Consider some determinants of the price elasticity of demand: • The availability of close substitutes • Whether the good is a necessity or a luxury • How broadly you define the market • The time horizon being considered A good without any close substitutes is likely to have relatively _____ demand, since consumers cannot easily switch to a substitute good if the price of the good rises.
Scenario: Do you think the price elasticity of demand for toyota (clutch vehicles) will increase, decrease or remain the same when each of the following occurs? Explain a. Other motor vehicles manufacturers, such as Honda and Ford, decided to make and sell clutch vehicles.b. Clutch vehicles produced from foreign countries are banned in the Philippine Market.c. Due to ad campaigns, Filipinos believe that clutch vehicles are much safer than automatic.The price elasticity of demand for clutch vehicles will increased. The time period over which you measure the elasticity lengthens. During that longer time, new models such as Ferrari appear.B. Solve for Price elasticity of demand. (20pts)The price of premium rice increases from Php38.00 to Php40.50 and the amount you buy falls from 10 kilos to 8 kilos per week.
16.) Suppose that a demand curve passes through the points (4,$4.00) and (8,$2.00). What is the price elasticity of demand measured between these two points? а.) -1 b.) 1 c.) -2 d.) 2 17.) Which of the following goods would you expect to have the highest price elasticity of demand? a.) Diamonds b.) Pretzels c.) Rice d.) Tap water
9. The table sets out the supply schedule of jeans. a. Calculate the elasticity of supply when the price rises from $125 to $135 a pair. b. Calculate the elasticity of supply when the average price is $125 a pair. C. Is the supply of jeans elastic, inelastic, or unit elastic? Price (dollars per pair) 120 125 130 135 Quantity supplied (millions of pairs per year) 24 28 32 36
2. The accompanying table lists the cross - 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? 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 the quantity of SUVS demanded. Cross-price Good elasticities of demand Air - conditioning units and kilowatts of electricity Coke and Pepsi High -…
Price (dollars per dozen) 30 50 Quantity supplied (dozens per day) 8 12 The table gives some data on the supply of roses in a small town. When the price rises from $15 a dozen to $25 a dozen, the elasticity of supply is O 0.80. O 0.20 O 1.25. O 5.00.
6. Elasticity and total revenue The following graph shows the daily demand curve for bikes in San Francisco. Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve. Note: You will not be graded on any changes made to this graph. *graph 1* On the following graph, use the green point (triangle symbol) to plot the annual total revenue when the market price is $30, $45, $60, $75, $90, $105, and $120 per bike. *graph 2* According to the midpoint method, the price elasticity of demand between points A and B is approximately ___ . Suppose the price of bikes is currently $30 per bike, shown as point B on the initial graph. Because the demand between points A and B is ___ , a $15-per-bike increase in price will lead to ___ in total revenue per day. In general, in order for a price decrease to cause a decrease in total revenue, demand must be ____.
5. The demand equation for a good is given by the equation: Q, = 520 – 20P, + 0.6Y + 2.9P, a. Find the price, income and cross price elasticity of demand when P, = 10, Y = = 21 700 and b. Discuss the effect on demand if there were a 20% increase in price c. Discuss the effect on demand if there were a 50% decrease in income
3. A demand equation for rice is Quantity = 100 - 10(Price) + 5(Income). Show your calculations in responding to these questions. a) What is the quantity when P-10 and Income 20? b) What is the price elasticity of demand when the Price is 10 and the Income is 20? c) What is the income elasticity of demand at this price and quantity? %3D
2. Imagine that you run a small bakery. In March the price of a cupcake was $2, and you sold 50 per day. In April you increased the price of cupcakes to $3 and you sold 40 per day. 1. Did your revenue increase or decrease? 2. What was the price elasticity of demand to Cupcakes when price increased from $2 to $3. 3. Do you think demand was elastic or inelastic prior to the change in prices
3. Suppose the price elasticity of demand for gasoline is 0.2 in the short run and 0.7 in the long run. If the price of gasoline rises 28 percent, what effect on quantity demanded will this have in the short run? In the long run?
5. The demand function is given by: Q= Y e¯ 0.01P. a) If Y = 800, calculate the value of P for which the demand is unit elastic. b) If Y = 800, find the price elasticity of the demand at current price of 150. c) Estimate the percentage change in demand when the price increases by 4% from current level of 150 and Y = 800. d) Calculate Q if P=100 and Y=900.Then determine if the product is superior or inferior with justification.