Goods A, B, and C are related goods, each operating in a perfectly competitive market. a. As the price of Good A increases from $8 to $10, its quantity demanded falls from 200 units to 160 units. Calculate the price elasticity of demand for this range. b. Good A is an input for Good B. Illustrate the effect of the price change from part (a) on a fully labeled supply and demand graph for Good B. Label the equilibrium price(s) and quantity or quantities. Use arrows to indicate any shifts. c. On your graph from (b), shade the consumer surplus lost in the market for Good B as a result of the change in part (a). d. The equilibrium price for Good C is $2, and the equilibrium quantity is 60 units. The cross-price elasticity of Good C with Good A is -3. i. Are Good C and Good A normal goods, inferior goods, complementary goods, or substitute goods? ii. Calculate the new equilibrium quantity of Good C after a 25% price increase for Good A.
Goods A, B, and C are related goods, each operating in a perfectly competitive market. a. As the price of Good A increases from $8 to $10, its quantity demanded falls from 200 units to 160 units. Calculate the price elasticity of demand for this range. b. Good A is an input for Good B. Illustrate the effect of the price change from part (a) on a fully labeled supply and demand graph for Good B. Label the equilibrium price(s) and quantity or quantities. Use arrows to indicate any shifts. c. On your graph from (b), shade the consumer surplus lost in the market for Good B as a result of the change in part (a). d. The equilibrium price for Good C is $2, and the equilibrium quantity is 60 units. The cross-price elasticity of Good C with Good A is -3. i. Are Good C and Good A normal goods, inferior goods, complementary goods, or substitute goods? ii. Calculate the new equilibrium quantity of Good C after a 25% price increase for Good A.
Chapter6: Systems Of Equations And Inequalities
Section: Chapter Questions
Problem 21T: A manufacturer produces two models of television stands. The table at the left shows the times (in...
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Transcribed Image Text:Goods A, B, and C are related goods, each operating in a perfectly competitive market.
a. As the price of Good A increases from $8 to $10, its quantity demanded falls from 200 units to 160 units. Calculate the price elasticity of demand for this range.
b. Good A is an input for Good B. Illustrate the effect of the price change from part (a) on a fully labeled supply and demand graph for Good B. Label the equilibrium price(s) and quantity or quantities. Use arrows to indicate any shifts.
c. On your graph from (b), shade the consumer surplus lost in the market for Good B as a result of the change in part (a).
d. The equilibrium price for Good C is $2, and the equilibrium quantity is 60 units. The cross-price elasticity of Good C with Good A is -3.
i. Are Good C and Good A normal goods, inferior goods, complementary goods, or substitute goods?
ii. Calculate the new equilibrium quantity of Good C after a 25% price increase for Good A.
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