Do not use Ai 9. Assume the elasticity of demand for oil is 0.7, and the initial Quantity demanded is 100 millionbarrels a day. What is the impact of a 10 percent increase in the Price of oil on the Quantity of oildemanded? What happens to total expenditures?[Demand falls by 7 million barrels a day, Expenditure rises by 3 percent]Assume that the United States initially imports 50 million barrels a day, and that product remainsunchanged. What happens to the level of imports and to expenditures on imports?[Import demand falls by 3.5 million barrels a day, Expenditure rises by 3 percent]Assume that in the long run, the elasticity of demand increases to 1. How does this change youranswers?[Import demand falls by 5 million barrels a day, Expenditure does not change]3

3. Long-run Scenario with Elasticity of Demand = 1: When elasticity increases to 1 (unit elastic):…

Answered: 9. Assume the elasticity of demand for…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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I am struggling with what formula to use.
Can you answer questions 27,18 and 19
Suppose an 18 percent drop in the price of strawberries leads to a 24 percent increase in the quantity demanded of strawberries and a 12 percent decrease in the quantity demanded of plums. a. What is the price elasticity of demand for strawberries? Instructions: Enter your response rounded to two decimal places. b. At the current price level, the demand for strawberries is (Click to select) because the price elasticity of demand for strawberries is (Click to select) c. What is the cross-price elasticity of demand between strawberries and plums? Instructions: Enter your response rounded to two decimal places. d. Strawberries and plums are (Click to select) because the cross-price elasticity of demand is (Click to select)
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6. Using the income elasticity of demand to characterize goods Data collected from the imaginary economy of Tralfamadore reveals that a 15% decrease in income leads to the following changes: • A 9% increase in the quantity of farb demanded • A 17% decrease in the quantity of sogem demanded • A 29% decrease in the quantity of welk demanded Compute the income elasticity of demand for each of the goods described, and select the appropriate value in the following table. Then indicate whether the income elasticity for each good indicates that it is 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 important information is conferred by the sign. Good Income Elasticity of Demand Normal or Inferior Good Farb Sogem Welk Which of the following three goods is most likely to be classified as a luxury good? Farb Sogem Welk
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3. Suppose that when the price of a candy bar increases by 20 percent, the quantity of candy bars demanded decreases by 15 percent. Given this information, you know that the demand for candy bars is because the absolute value of the coefficient of price elasticity of demand is A. inelastic; less than 1.0. inelastic; more than 1.0. C. unit elastic; equal to 1.0. elastic; more than 1.0. E. elastic; less than 1.0. ABCDE
7. Using the income elasticity of demand to characterize goods Data collected from the imaginary economy of Ilium reveals that a 16% increase in income leads to the following changes: • An 18% increase in the quantity of pubrork demanded • A 14% decrease in the quantity of farb demanded • A 30% increase in the quantity of welk demanded Compute the income elasticity of demand for each of the goods described, and select the appropriate value in the following table. Then indicate whether the income elasticity for each good indicates that it is 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 important information is conferred by the sign. Good Income Elasticity of Demand Normal or Inferior Good Pubrork Farb Welk Which of the following three goods is most likely to be classified as a luxury good? O Pubrork O Welk O Farb
For the first time in two years, Big G (the cereal division of General Mills) raised cereal prices by 4 percent. If, as a result of this price increase, the volume of all cereal sold by Big G changed by -6 percent, what can you infer about the own price elasticity of demand for Big G cereal? It is (Click to select) v Can you predict whether revenues on sales of its Lucky Charms brand increased or decreased? O Yes - it decreased. O No - you can't tell. O Yes - it increased.
The market for digital watches is at its market equilibrium. Now the cost of producing a digital watch rises, and at the same time, the price is expected to fall next month. What is the effect on the equilibrium price and equilibrium quantity this month? This month, the equilibrium price of a digital watch ________ and the equilibrium quantity of digital watches ________. A. will rise; will decrease B. might rise, fall, or not change; will decrease C. will rise; might increase, decrease, or not change D. will fall; will increase
Suppose that the quantity of steel demanded in France is given by Qk = 100 +2Ps + 0.5Y + 0.2PA, where Qs is the quantity of steel demanded per year, Ps isthe market price of steel, Y is real GDP in France, and PA is the market priceof aluminum. In 2011, Ps = 10, Y = 40, and PA = 100. How much steel will bedemanded in 2011? What is the price elasticity of demand, given marketconditions in 2011?
k 5 i < ( U

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