According to the graph below, a change in the spending plans of consumers, businesses, government, or foreigners is illustrated by the movement from point to point LRAS SRAS B P₁ Po AD1 ADo YY₁ OA; B OC; A OC; B OB; C
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- Assume that a retailer sells 1000 six packs of Pepsi per day at at $3./6pk. You, as an economic analysis , estimate that the cross price elastcity between pepsi and coca cola is 0.4. If the retailer raises the price of coca cola by 10%, how would sales of pepsi be affected, ceteris paribus, why(20). Due to good weather, there is an increase in the demand for the good. The new demand equation is Qd=190-2p. The government is trting to decide between two options: Maintain the number the number of quotas and let the market adjust , or maintain the price support and increase the number of quotas. suppose that the government decides to maintain the number of quotas and let the amrket adjust. calculate price observe in the market consumer surplus producer surplus deadweight (21). suppose now that the government decides to increase the number of quota available to 72 units but it keeps the price support at the current level at $72. calculate the consumer surplus the producer surplus the deadweightA grocery store is considering putting broccoli on sale, temporarily reducing the price 501 %. Let Y₁¡ denote the amount of broccoli household i would purchase if broccoli is on sale when they visit the grocery. And let Yoi denote the amount of broccoli household i would purchase if broccoli is not on sale when they visit the grocery. Which of the following represents the causal effect of putting broccoli on sale on the amount of broccoli household i purchases? O Y₁i-Yoi 10 Y + Y li 2 O Y₁i O O Oi
- Suppose you observed that the consumption of organges increased sharply last year, however thet total consumer expenditure on oranges did not change. Did a supply shift, demand shift or both cause this? explain using graphsThe Globe and Mail (December 16, 1997) reported that milk consumption declined following price increases: “Since the early 1980s, the price of milk in Canada has increased 22 per cent. As prices rose, the demand for milk fell off. Total [consumption] of milk on a per capita basis dropped . . . to 2.62 hectolitres in 1995 from 2.92 hectolitres in 1986.” Use these data to estimate the price elasticity of demand for milk. (1.5marks) 0.49 milk is inelastic According to your estimate, what happens to milk producers’ revenue when the price of milk rises? (1 mark) When the price of milk rises milk producers revenue drop because the demand for milk dropped Why might your estimate of the elasticity be unreliable? (Hint: Notice that The Globe and Mail is careless about the distinction between demand and quantity demanded.) (1 mark)According to studeis undertaken by the U.S. Department of Agriculture, the price elasticity of demand for cigarettes is between -0.3 and -0.4 and the income elasticity is about +0.5. Suppose congress, influenced by studies linking cigarette smoking to cancer, plans to raise the excise tax on cigarettes so the price rises by 10 percent. Estimate the effect the price increase will have on cigarette consumption and consumber spending on cigarettes (in percentage terms).
- In 2005, suppose a typical U.S. owner of a home theater (a television and a DVD player) bought 8 music CDs (q₁) per year and 24 top-20 movie DVDs (9₂) per year. The average price of a CD was about p₁ = $15, the average price of a DVD was roughly p₂ = $20, and the typical consumer spent $600 on these entertainment goods. We'll call this typical consumer Barbara. We estimate her Cobb-Douglas utility function as 0.2 0.8 U(91, 92)=91 9₂ Use the 3-point curved line drawing tool to draw Barbara's annual demand curve for CDs, using prices of $15, $30, and $60 as your control points. Carefully follow the instructions above, and only draw the required object. Explain the shape of the price-consumption curve for changes in the price of good q₁. The equation for Barbara's price-consumption curve for changes in the price of good q₁ is |91 92 = (Properly format your expression using the tools in the palette. Hover over tools to see keyboard shortcuts. E.g., a subscript can be created with the_…True/ False Income and consumption has a direct relationship for the normal goods.Joe likes eating candy and drinking soda, The price of a bar of candy is $2 while the price of a can.of soda is $3. joe has a budeet of 529. Suppose that candy and soda can only be purchased and consumed as whole units (in other words it is impossible for Joe to purchase 1/3 of a bar of candy or A/5 of a can of soda). Furthermore, assume that it is impossible for Joe to spend more than his budget (that is, his total expenditure on candy and soda cannot exceed his budget). The following table describes the marginal benefit (expressed in $) he obtains from each bar of candy and can of soda Marginal Benefit from Marginal Benefit from Soda (in $) Unit Candy (in $) 180 180 160 150 3 140 120 60 5. 100 45 60 30 7. 40 15 8 10 -30 9. 60 -90 10 -100 -120 Joe's optimal consumption bundle includes (enter a numerical answer here) bars of candy and (enter o (enter a numerical answer here) cans of soda, and the total benefit he derives from the consumption of the optimal bundle is $ numerical answer…
- The bar graph below shows the percentages of income spent on food (i.e., the portion of a consumer's budget devoted to food spending) and the elasticities of demand (in absolute value) for several countries' residents. [Click on the bar graph to open a PDF viewable version in another tab.] Malawians Haitians Bangladeshis Indians Brazilians Koreans. Greeks Italians Australians French Canadians Americans Percentage of Income spent on Food 17% 15% 14% 12% W 31% 28% 35% 40% X 56% Elasticity of Demad 66% 81% 75% According to the bar graph, which of the answer choices is correct? Malawians spend less money on food than Australians. French spend less money on food than Brazilians. Bangladeshis spend a larger percentage of their income on food than Americans. O Canadians spend a larger percentage of their income on food than KoreansLook at the case, would that cause a change in QD or a change in demand? Would it cause it to go up or down?TABLE 12.1 | Two Stage Least Squares Estimates of the Demand for Cigarettes Using Panel Data for 48 U.S. States Dependent variable: In(Qfte) – In(Qfte) cigarettes Regressor (1) (2) (3) In(Peisarettes) - In(Pçigarettes -0.94** -1.34** -1.20** i,1995 i,1985 (0.21) (0.23) (0.20) In(Inc;1995) – In(Inc;1985) 0.53 (0.34) 0.43 (0.30) 0.46 (0.31) Intercept -0.12 -0.02 -0.05 (0.07) (0.07) (0.06) Both sales tax and Instrumental variable(s) Sales tax Cigarette-specific tax cigarette-specific tax First-stage F-statistic 33.70 107.20 88.60 Overidentifying restrictions J-test and p-value 4.93 (0.026) These regressions were estimated using data for 48 U.S. states (48 observations on the 10-year differences). The data are described in Appendix 12.1. The J-test of overidentifying restrictions is described in Key Concept 12.6 (its p-value is given in parentheses), and the first-stage F-statistic is described in Key Concept 12.5. Individual coefficients are statistically significant at the *5%…
