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- The 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).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%…
- not use ai pleaseThe weekly demand for sobolo among the 2017 cohort of BSc Admin students at the UGBS is Qdx =50-4PX +0.5I +10Py -2PzWhere Qdx is the quantity demanded for soboloPX is the price of sobolo per 1bottleI is the income of consumers in Ghana cedisPy and Pz are the prices of two goods that are related to soboloa. Based on the demand function above, is sobolo a normal good or inferior good? Explain your answer.b. Based on the demand function above , what is the relationship between sobolo and good Yc. Based on the demand function above , what is the relationship between sobolo and good Zd. What is the equation of the demand for sobolo if consumer incomes areGHS30, the price of good Y is GHS 10 and the price of good Z is GHS 20?e. Graph the demand function for sobolo from d)The graph below shows the market for mandarin oranges in Odin for the month of November (in thousands of kilos). Tools 7. D2 6. 4. 3. 2. 840 1080 960 120 360 600 240 480 720 Quantity per month Price
- Exercise D9 What is the marginal propensity to consume, and how is it related to the marginal propensity to import?A recent report by the Centers for Disease Control looked at the relationship between the price of beer and the incidence of new cases of STD's. The report concluded that a beer tax increase of $.20 could reduce overall STD rates by 8.9%. Assume that a six pack cost $5.90 before the price increase. Calculate the cross price elasticity between beer and STD's. What is the sign of this cross-price elasticity? According to your estimate, are beer and STD's compliments or substitutes? Does your answer make sense? Explain.Scenario 5-3The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. Refer to Scenario 5-3. Total consumer spending on aged cheddar cheese will a. increase, and total consumer spending on bread will increase. b. increase, and total consumer spending on bread will decrease. c. decrease, and total consumer spending on bread will increase. d. decrease, and total consumer spending on bread will decrease.
- Consider public policy aimed at smoking. Studies indicate that the price elasticity of demand for cigarettes is about 0.5. If a pack of cigarettes currently costs $5 and the government wants to reduce smoking by 30%, it should increase the price by . If the government permanently increases the price of cigarettes, the effect on smoking 1 year from now will be than the effect 5 years from now. Studies also find that teenagers have a higher price elasticity of demand than do adults. Which of the following statements are consistent with this result? Check all that apply. It is legal for adults to consume alcohol, so many choose to spend their money on that good rather than cigarettes. Adults are more likely to be addicted to cigarettes. Teenagers do not have as much income as adults, so they are more price sensitive.Revenue R from the sale of x units of a product is found by multiplying the price by the number of items sold. (a) Factor the right side of R = 200x - x². R = (b) What is the expression for the price of the item? The consumer expenditure, in dollars, for a commodity is the product of its market price, p, and the number of units demanded, x. Suppose that for a certain commodity, the consumer expenditure is given by 9,000p - 150p². (a) Factor this in order to find an expression for the number of units demanded. (Simplify your answer completely.) x = units (b) Use (a) to find the number of units demanded when the market price is $33. x = units A company's average cost per unit when x units are produced is defined to be Total cost Average cost = Χ Suppose a company's average costs are given by 6000 Average cost = +35+0.2x. X Express the average-cost formula as a single fraction. Average cost = 3The expenditure minimization problem is given as: minx₁x₂ P₁x₁ + P₂x2 s. t. U (x₁x₂) 1. Solve for x₁,x2 using Lagrangean Method 2. Solve using Expenditure function E (Px1Py2, U) = xx2; Assume a = 0.5 and ß = 0.5
