8. Short-run and long-run effects of a shift in demandSuppose that the turkey industry is in long-run equilibrium at a price of $5 per pound of turkey and a quantity of 400 million pounds per year. Suppo:the Surgeon General issues a report saying that eating turkey is bad for your health.The Surgeon General's report will cause consumers to demandturkey at every price. In the short run, firms will respond byShift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the Surgeon General's report.109SupplyDemand8SupplyPRICE (Dollars per pound)5321080 160 240 320 400 480 560QUANTITY (Millions of pounds)0In the long run, some firms will respond byD2D₁640 720 800until Shift the demand curve, the supply curve, or both on the following graph to illustrate both the short-run effects of the Surgeon General's reportand the new long-run equilibrium after firms and consumers finish adjusting to the news.109SupplyDemand8SupplyDemand080 160 240 320 400 480 560 640 720 800QUANTITY (Millions of pounds)in the longThe new equilibrium price and quantity suggest that the shape of the long-run supply curve in this industry isrun.PRICE (Dollars per pound)320

There are various factors that affect the demand and/or supply of a particular good and/or service.

8. Short-run and long-run effects of a shift in demand Suppose that the turkey industry is in long-run equilibrium at a price of $5 per pound of turkey and a quantity of 400 million pounds per year. Suppo: the Surgeon General issues a report saying that eating turkey is bad for your health. The Surgeon General's report will cause consumers to demand turkey at every price. In the short run, firms will respond by Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the Surgeon General's report. 10 9 Supply 8 PRICE (Dollars per pound) 2 1 0 D2 D. 1 80 160 240 320 400 480 560 640 720 800 QUANTITY (Millions of pounds) 0 In the long run, some firms will respond by 中翼中国 Demand Supply until

8. Short-run and long-run effects of a shift in demand Suppose that the turkey industry is in long-run equilibrium at a price of $5 per pound of turkey and a quantity of 400 million pounds per year. Suppo: the Surgeon General issues a report saying that eating turkey is bad for your health. The Surgeon General's report will cause consumers to demand turkey at every price. In the short run, firms will respond by Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the Surgeon General's report. 10 9 Supply 8 PRICE (Dollars per pound) 2 1 0 D2 D. 1 80 160 240 320 400 480 560 640 720 800 QUANTITY (Millions of pounds) 0 In the long run, some firms will respond by 中翼中国 Demand Supply until

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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10. Price elasticity of supply in the short run and long run The following graph shows the long-run supply curve for pistachios. Place the orange line (square symbol) on the following graph to show the most likely short-run supply curve for pistachios. (Note: Place the points of the line either on N and K or on N and H.) PRICE (Dollars per pound) 48 908 40 0 8 0 0 O 4 N H D Long-Run Supply 2 6 8 10 QUANTITY (Thousands of pounds of pistachios) 12 10 Short-Run Supply (?)
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.
A. Using the mid point equation, calculate the price elasticity of demand for the market demand curve for a change from the equilibrium price of $4.00( show the equation and all calculations) is the demand curve elastic or I elastic for this price change? What would happen to the total market revenue if the price changed to $4.00 b. If a new firm(competitor) enters this market so that 6adsitional units are supplied at each price above $0, what would happen to the equilibrium price and quantity and the total market revenue of the market. Add a new market supply curve to your original graph and indicate the new equilibrium price and quantity on the appropriate axes.
1. Jeff Jones at Ice ‘n Carry ('InC') Coolers reduced the price of InC coolers by $10 from the usual $40. Weekly sales increased from 10 to 20 InC Coolers per week. a. What is the arc price elasticity of demand? b. Jeff is considering a further price reduction. What would be the effect of the reduction on revenues? How about profits? Revenues: Profits: Increase/ Decrease / Can't tell Increase/ Decrease / Can't tell
1. Online the timing and tailoring of prices to specific models of products is the key to successful pricing in online markets. And “Thanks to the ready availability of data in online markets, a pricing manager can easily approximate the elasticity of demands for the different products it sells online.” Assuming a 10 percent decrease in price increases sales by 28 percent, calculate the price elasticity of demand? If the wholesale price of the online product is $50 and sells at a price comparison site that charges $.50 per click and boasts a conversion rate of 5 percent (an average of 20 clicks are needed to generate a sale). What price should you charge for the product? What is the optimal markup on cost? 2. The authors assert that price sensitivity is affected by (1) product life cycles, and (2) numbers of competitors. In fact, “when the number of competing sellers doubles, a firm’s elasticity of demand is expected to double (and you should be able to verify this through…
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?
Suppose the accompanying table contains data on how many Veggie Delite sandwiches Subway is willing to sell each day at two different prices. Calculate the daily price elasticity of supply when the price increases from $5.00 to $7.50. Please round to the nearest hundredth. Price(per sandwich) Quantity supplied(sandwiches per day) $5.00 200,000 $7.50 210,000 a. Daily price elasticity of supply for Veggie Delite sandwiches = b. The daily price elasticity of supply for Veggie Delite sandwiches is relatively Elastic or Inelastic Now consider how responsive Subway’s supply of Veggie Delite sandwiches is to changes in price on an annual basis instead of a daily basis. c. Compared to the daily value, the annual price elasticity of supply for Veggie Delite sandwiches is likely to be more Inelastic or Elastic and the annual supply curve is likely Flatter or Steeper to be than the daily supply curve.
1. Suppose you are given the following information about the demand for vinyl records: P = 60 – 1.5QD a) Suppose the price increases from $15 to $30, what is the arc elasticity of demand? b) Suppose the price decreases from $30 to $ 15, what is the arc elasticity of demand? c) How does you answer from part (a) and (b) compare with the point elasticity of demand when price is $15? What about when price is $30?
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?
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 0
5. If Reebok Shoes (RS) experiences a decrease in popularity, which of the following would happen? a shift in the Demand curve for RS to the right a movement along the demand curve for RS, downward and to the right a shift in the supply curve of RS to the right a shift in the Demand curve for RS to the left no shift in the Demand curve for RS
8. Refer to Figure 2 below. Using the midpoint method, what is the price elasticity of supply between point B and point C? 1.44 1.29 0.96 0.69 a. b. C. d. 9. Refer to Figure 2 below. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would a. b. C. d. a. b. increase. decrease. remain unchanged. The effect on total revenue cannot be determined from the given information. C. d. PRICE 10 9 8 7 6 5 4 3 2 1 Figure 2 Supply 10. Which of the following statements is valid when the market supply curve is vertical? Market quantity supplied does not change when the price changes. Supply is perfectly elastic. An increase in market demand will increase the equilibrium quantity. An increase in market demand will not increase the equilibrium price. 50 100 150 200 250 300 350 400 450 500 QUANTITY ||