A. A rise in the price of coffee from S 1.5 to $2.8 results in a rise in the quantity of tea demanded from 200 packets to 260 packets a day. Calculate the cross clasticity of demand will be approximately and explain the relationship between the two goods. B. If the quantity of banking services demanded increases by 5 per cent when the price of banking services falls by 5 per cent, is the demand for banking services inelastic, elastic, or unit elastic? Justify your answer.

A. A rise in the price of coffee from S 1.5 to $2.8 results in a rise in the quantity of tea demanded from 200 packets to 260 packets a day. Calculate the cross clasticity of demand will be approximately and explain the relationship between the two goods. B. If the quantity of banking services demanded increases by 5 per cent when the price of banking services falls by 5 per cent, is the demand for banking services inelastic, elastic, or unit elastic? Justify your answer.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 15CTQ: Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the...

See similar textbooks

Similar questions

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
M7
Consider the table below. Assuming the law of demand holds, the cell labeled "?" could be which of the following quantities? Price of a Quantity of movies movie Demanded $15 155 $17 ? O 155 163 157 171 O 143
please answer it legible and clear with complete solutiuon and asnwer it all... thank you
Solve i,ii, iii
QUESTION 13 Refer to the information provided in Figure 3.7 below to answer the following question(s). $4 Price of pizza 0 B Figure 3.7 3 D₂ D₂ Number of pizzas per month D3 Refer to Figure 3.7. A decrease in demand is represented by the movement O from D₂ to D1- O from D2 to D3- along D2 from Point B to Point C. O along D2 from Point B to Point A.
R4
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
Graph the accompanying demand data , and then use the midpoint formula for e to determine price elasticity of demand for each of the possible $1 price changes what can you conclude about the relationship between the slope of a curve and its elasticity? Explain in a non technical way why demand is elastic in the northwest segment of the demand curve and inelastic in the southeast segment
rom California to New York, legislative bodies across the United States are considering eliminating orreducing the surcharges banks impose on non-customers, who make $14 million in withdrawals from otherbanks’ ATM machines. On average, non-customers earn a wage of $26 per hour and pay ATM fees of $3.25per transaction. It is estimated that banks would be willing to maintain services for 6 million transactionsat $1.50 per transaction, while non-customers would attempt to conduct 22 million transactions at thatprice. Estimates suggest that, for every 1 million gap between the desired and available transactions, atypical consumer will have to spend an extra minutes traveling to another machine to withdraw cash.(a) Based on this information, what would be the nonpecuniary cost of legislation that would place a$1.50 cap on the fees banks charge for non-customer transactions?(b) What would be the full economic price of this legislation?(c) Using a graph, illustrate the situation described…
These questions require application of economic theory relating to elasticity of demand andsupply. All calculations must be shown in full. Answer ALL the questions.Q.3.1 A store that sells maize meal discovers that when the price of 1kg maize meal IsR24 per kilogram, the quantity demanded is 306 kgs per week. When the pricedecreases to R21 per kg, then the sales increase to 340 kgs per week. Use thisinformation to answer questions Q.3.1.1 and Q.3.1.2 below.Q.3.1.1 Determine the price elasticity of maize meal using the Arc method. (5)Q.3.1.2 Discuss the relationship between the price elasticity of maize mealand the total revenue the store received from the sales. Advise thestore on an appropriate pricing strategy.(7)Q.3.2 The store selling maize meal makes a further discovery, when the price of ricechanges from R30 per kg to R26 per kg, then the quantity of rice demandeddecreases from 1360 kg per month to 1238 kg per month. Use this informationto answer Q.3.2.1 and Q.3.2.2 below.Q.3.2.1…
For each case below, state whether you think the correlation is positive or negative. Also state whether the correlation is due to a direct cause, common underlying cause or a coincidence. a. Correlation between demand for breakfast cereal and demand for bread. The correlation is likely? The correlation is likely due to O a direct cause because an increase in demand for breakfast cereal would likely cause an increase in demand for bread O a common underlying cause that would affect both demand for breakfast cereal and demand for bread O a direct cause because an increase in demand for breakfast cereal would likely cause a decrease in demand for bread O a coincidence because it is unlikely that an increase in demand for breakfast cereal would cause demand for bread to change