Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Chapter 20, Problem 3CQ
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Given his current income, Rico’s demand for bagels is related to the price of bagels by the equation Q = 540 − 16P. Rico’s income elasticity of demand for bagels is known to be equal to 0.5 at all prices and incomes. If Rico’s income quadruples, his demand for bagels will be related to the price of bagels by the equation: (choose and explain one option from below) a. Q = 540 − 16P b. Q = 2,160 − 64P c. Q = 540 − 32P d. Q = 1,080 − 32P e. Q = 1,080 − 16P
If the utility function for a consumer is defined by U=6X^3/5Y^2/5 Given that the consumer's income is 300 currency units and unit price of goods X and Y are 12 and 15 currency units respectively, calculate the equilibrium quantity of both goods.
Compute the price elasticity of demand for both goods and interpret your results.
If income and prices of the two goods increase by 50%, calculate the equilibrium quantities of both goods
In the following questions, give all your answers to two decimals.
Patrice works as an economist for the Bureau of Labor Statistics (BLS). Her current project is to estimate the
effect of changes in income, prices of related goods, and the price of potatoes on the demand for beef. Patrice has
the following data:
Price elasticity of demand for beef
-0.80
Income elasticity of demand for beef
+ 1.40
Cross-price elasticity between beef and chicken
+1.20
Cross-price elasticity between beef and potatoes
-0.50
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Economics: Private and Public Choice
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- Estimates presented in Exhibit 5 show that Android users have a higher price elasticity of demand for apps in the Google Play Store than do iPhone users in the Apple App Store. Why might Android users tend to be more sensitive to app prices than iPhone users? What categories or types of apps (for example, games/social media) do you think have the highest price elasticities?arrow_forwardSuppose Sally buys exactly five bars of English toffee each week, regardless of whether the toffee bars are regularly priced at 1 or on sale for 0.50. Based on this information, what is Sallys price elasticity of demand for English toffee in this price range? a. 0 b. 1 c. Infinity d. Cannot be determined.arrow_forward. Economists often say that goods tend to have more elastic demand when they have lots of close χδ = α + (1 - a) substitutes. Use the CES utility function U(x, y) to show that the own-price elasticity of demand for good X gets larger (in absolute value) as the elasticity of substitution gets larger.arrow_forward
- Income Elasticity. Suppose the price of a pastry cake is $4. When Maxwell’s income was $2000 per month, his monthly demand for pastry cakes was Q = 16 – 2P. When Maxwell got a pay raise and began to earn $4000 per month, his demand shifted to Q = 40 – 2P. Given this information, find Maxwell’s income elasticity for pastry cakes. Hint: You’ll first have to find the two quantities.arrow_forwardIf Beluga caviar has an income elasticity of demand which is > 0 and Ramen noodles have an income elasticity of < 0, it means that Multiple Choice The two goods are complements Beluga caviar is a normal good and Ramen noodles are an inferior good Beluga caviar has fewer substitutes than Ramen noodles Beluga caviar is an inferior good and Ramen noodles are a normal goodarrow_forwardIf the cross-price elasticity of demand for good X with respect to good Y equals 0, how is that value interpreted? These goods are complements, and the quantity demanded of good X increases if the price of good Y decreases. These goods are unrelated, and a change in the price of good Y has no effect on the quantity of good X demanded. These goods are normal goods, and a change in buyers income increases the quantity demanded of good X. These goods are substitutes, and the quantity demanded of good X decreases if the price of good Y decreases.arrow_forward
- Ralph consumes apples (A) and bananas (B). His Marshallian demand for bananas is 10.5 p0.2 6p0:7 B* = (a) Find and interpret the income elasticity of demand for bananas (eğ,1) and interpret the value. Are bananas an inferior or normal good? (b) Find the own price elasticity of demand for bananas (¤Â‚Ãß) and interpret the value. Does the own price elasticity of demand for bananas depend on the value of PB? (c) Find the cross price elasticity of demand for bananas (е‚Ã) and interpret the value. Are bananas and apples gross substitutes or gross complements?arrow_forwardAssume the market demand for tuna cans may be written as Qtc = 45 - 2 x Ptc + Psc+ 0.3y (where Ptc = price of tuna cans and Psc = price of sardine cans, and y = income). Further assume that both tuna cans and sardine cans sell for $1 and income is $25. Calculate cross - price elasticity for tuna cans and identify whether the goods are substitutes or complements.arrow_forwardCalculate elasticity of substitution using information in the table below when wage increases from 250 to 300. Before wage increase After wage increase Q 100 100 W 250 300 R 250 250 E 200 150 K 200 250arrow_forward
- Assume that a consumer finds that his total expenditure on compact discs stays the same after the price of compact discs declines. Which of the following is true for this price change? Compact discs are inferior goods to this consumer. The consumer's demand for compact discs increased in response to the price change. The consumer's demand for compact discs is perfectly price elastic. The consumer's demand for compact discs is perfectly price inelastic. The consumer's demand for compact discs is unit price elastic. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure.arrow_forwardIn workout problem 8.4, Maude thinks delphiniums and hollyhocks are perfect substitutes, one for one. If delphiniums currently cost $3 per unit and hollyhocks cost $4 per unit and if the price of delphiniums rises to $6 per unit, the income effect of the change in demand for delphiniums will be bigger than the substitution effect. there will be no change in the demand for hollyhocks. the entire change in demand for delphiniums will be due to the substitution effect. 1/3 of the change in demand will be due to the income effect. 2/3 of the change in demand will be due to the income effect.arrow_forwardPlease answer ASAP will upvote, thanks!arrow_forward
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