6. Determinants of price elasticity of demandConsider some determinants of the price elasticity of demand:The availability of substitutes• The market used to measure demand• The share of budget spent on the product• The time horizon being consideredA good without any close substitutes is likely to have relativelythe price of the good rises.The price elasticity of demand for a good also depends on how broadly the good is defined.Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elasticdemand, and which will have a demand elasticity that falls in between.Categories Most Elastic In Between Least ElasticBeveragesWineMerlotdemand, because consumers cannot easily switch to a substitute good ifPrice elasticity for a good also depends on the share of a consumer's budget spent on a good.Other things being equal, which of the following goods has the most elastic demand?TV and Internet service planLightbulbsToothbrushThe price elasticity of demand is also affected by the given time horizon.Compared to the short-run demand for oil, the demand for oil in the long run will tend to beelastic.

If a good does not have any close substitutes available, then the good will have a relatively…

Answered: 6. Determinants of price elasticity of…

ENGR.ECONOMIC ANALYSIS

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Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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1. Determinants of the price elasticity of demand Consider the following list containing several price elasticity of demand determinants: The availability of close substitutes Whether a good is a luxury or necessity How broadly the market is defined The time horizon under consideration A good in the presence of many close substitutes is predicted to have relatively, purchase one of the close substitutes if the price of the good were to increase. demand, since consumers can easily choose to elastic The price elasticity of demand of a good depends in part on its relative necessity inelastic ison to other goods. Assume the following goods all have approxiunately the same price. Which of the aande kan th
Explain the general determinants in one paragraph. GENERAL DETERMINANTS OF DEMAND• Good’s own price (P) is the key determinant of demand• Other determinants of demand:1. Level of income (Y) of the potential purchasers of the good or service.a. Normal good – a good in which an increase in income raises its sales.b. Inferior good – a good in which an increase in income causes a reduction in spending.2. Prices of related goodsa. Substitute good – a good in which can substitute for another good (competitor’sgood). An increase in the price of the substitute good or service causes an increase indemand for the another good.b. Complementary good – a good that complements with another good. That is, anincrease in demand for one causes an increase in demand for the other. An increase inthe price of a complementary good reduces demand for the another good.3. Population (number of consumers that consume goods/services)4. Tastes and preferences5. Consumer’s expectation towards future market…
3. When the Price of a product was changed by 30%, the quantity demand has increased by 30%. Calculate the coefficient price elasticity of the product and analyze the degree of elasticity. Draw the elasticity curve for the scenario
9. Application: Elasticity and hotel rooms The following graph input tool shows the daily demand for hotel rooms at the Oceans Hotel and Casino in Atlantic City, New Jersey. To help the hotel management better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demand factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. Demand Factor Average American household income Roundtrip airfare from New Orleans (MSY) to Atlantic City (ACY) Room rate at the Meadows Hotel and Casino, which is near the Oceans Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. 500 450 400 350 300 250 200 150 100 50 0 Demand 0 50 100 150 200 250 300 350…
7. Using the income elasticity of demand to characterize goods A survey taken by residents from the imaginary town of Draw City tells economists that the following changes result from a 10% rise in income: • A 2% increase in the quantity of tokens demanded • A 17% decrease in the quantity of kings demanded • A 34% increase in the quantity of jokers demanded Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on the income elasticities, classify each good as either a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign gives important information.) Good Income Elasticity of Demand Normal Good or Inferior Good Tokens -0.2 Kings Jokers Which of the following three goods is most likely to be…
4. The demand function of certain good is given by: P = (50 + Y) e 0.1Q, where Y denotes the income level. %3D a) If P = 20 andY = 50, calculate the quantity demanded. b) Is the good inferior or superior? c) If Y = 50, calculate the value of Q for which demand is unit elastic.
microeconomics
i need help with this microeconmics question 5
3. Suppose a 10% increase I price of a different product (such y), has resulted in a 30% decrease in the demand for OUR product (say, product X). What can you tell about cross elasticity of demand? (Calculate and demonstrate your answer). Are x and y substitutes or complement? Why?
5. The demand equation for a good is given by the equation: О, 3 520 — 20Р, + 0.6Y + 2.9Р, a. Find the price, income and cross price elasticity of demand when P, = 10, Y = Р, 3 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
Suppose that demand schedule for discs is represented in the table below. PRICE ($) 8 10 QUANTITY DEMANDED (INCOME $10,000) 40 32 QUANTITY DEMANDED (INCOME $12,000) 50 46 If your income is $12,000, use the midpoint method to calculate your price elasticity of demand as the price of compact discs increases from $8 to $10. Select one: O a. The price elasticity of demand for discs is equal to -1.25 and demand is elastic. b. The price elasticity of demand for discs is equal to -1 and demand is inelastic. c. The price elasticity of demand for discs is equal to -0.375 and demand is inelastic. Od. The price elasticity of demand for discs is equal to -1 and demand is unit elastic.
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