Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 5, Problem 1IAPA
Use the following data to work Problems 1 and 2.
When Elle’s Espresso Bar increased its prices by 10 percent, the quantity of coffee that Elle sold decreased by 40 percent. When Elle and all her competitors cut their prices by 10 percent, the quantity of coffee sold by Elle increased by only 4 percent.
Calculate the
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QUESTION 20
Justin has a subscription to both Hulu and YouTube TV. He uses Hulu to catch up on shows and then streams the new seasons on YouTube TV. When the price of
Hulu increased, he cancelled subscriptions to both. Camilla only has a subscription to Hulu. When the price of Hulu increased, she cancelled the subscription to
Hulu and switched to a subscription to YouTube TV. When considering the cross-price elasticity of demand for Hulu and YouTube TV,
O Camilla's would be negative and Justin's would be positive.
O Camilla's would be zero and justin's would be large and positive.
Camilla's would approach infinity and Justin's would be zero,
O Camilla's would be positive and justin's would be negative.
You work for Apple and are trying to predict potential changes in the markets for
their products. In researching elasticity information you learn the following... the
Price elasticity of demand for the iPad tablet is -1.7, the cross-price elasticity of
demand between the Surface Pro tablet and the iPad Pro tablet is 1.4, the cross-
price elasticity of demand between iPad and a Dell Computer is .75, the cross-price
elasticity of demand between an iPad and a MacBook is -0.2 , the income elasticity
for an iPad is 1.9, the income elasticity for a Macbook is 2.2, and the income
elasticity for a Dell is 1.2. If every household receives stimulus money that increases
their income at the same time that a micro-chip shortage occurs that primarily
hinders Dell computer production (since hypothetically Apple utilizes a different type
of chip), what do you think will be the impact on equilibrium price/quantity in the
iPad and Macbook markets? i.e. Will the equilibrium prices increase/decrease and…
Use the midpoint method for calculating all elasticity measures below
Suppose the price of laundry detergent increases from $7 to $9 per bottle.suppose it is only one brand of laundry detergent that increases from $7 to $9 per bottle. The quantity of that brand demanded drops from 2,500 to 1,500 cases. Calculate the elasticity of demand for this laundry detergent specifically. Explain the difference between one brand's elasticity of demand and the elasticity of demand for laundry detergent in general.
Chapter 5 Solutions
Foundations of Economics (8th Edition)
Ch. 5 - Prob. 1SPPACh. 5 - If the price of a wool sweater did not change,...Ch. 5 - Prob. 3SPPACh. 5 - The price elasticity of demand for Petes chocolate...Ch. 5 - Prob. 5SPPACh. 5 - Prob. 6SPPACh. 5 - A survey found that when incomes increased by 10...Ch. 5 - Did Starbucks start a pumpkin boom? Ever since...Ch. 5 - Prob. 9SPPACh. 5 - Use the following data to work Problems 1 and 2....
Ch. 5 - Prob. 2IAPACh. 5 - When rain ruined the banana crop in Central...Ch. 5 - Prob. 4IAPACh. 5 - Drought cuts the quantity of wheat grown by 2...Ch. 5 - Prob. 6IAPACh. 5 - Use the following information to work Problems 7...Ch. 5 - Use the following information to work Problems 7...Ch. 5 - When the price of ice cream rises from $3 to $5 a...Ch. 5 - In Pioneer Ville, the price elasticity of demand...Ch. 5 - The price elasticity of demand for a good is 0.2....Ch. 5 - Prob. 4MCQCh. 5 - When the price of a good rises from $5 to $7 a...Ch. 5 - Prob. 6MCQCh. 5 - Prob. 7MCQ
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- Maria has decided always to spend one third of her income on clothing. a. What is her income elasticity of clothing demand? b. What is her price elasticity of clothing demand? c. It Marias tastes change and she decides to spend only one fourth of her income on clothing, how does her demand curve change? What is her income elasticity and price elasticity now?arrow_forwardIsabella always spends $50 on red roses each month and simply adjusts the quantity she purchases as the price changes. What can you say about Isabella's elasticity of demand for roses?arrow_forwardSuppose that your demand schedule for DVDs is as follows: Price Quantity Demanded (income = 10,000) Quantity Demanded (income = 12,000) 8 40 DVDs 50 DVDs 10 32 45 12 24 30 14 16 20 16 8 12 a. Use the midpoint method to calculate your price elasticity of demand as the price of DVDs increases from 8 to 10 if (i) your income is 10,000 and (ii) your income is 12,000. b. Calculate your income elasticity of demand as your income increases from 10,000 to 12,000 if (i) the price is 12 and (ii) the price is 16.arrow_forward
- The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?arrow_forwardEconomists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?arrow_forwardCharles loves Mello Yello and will spend 10 per week on the product no matter what the price. What is his price elasticity of demand for Mello Yello?arrow_forward
- (Cross-Price Elasticity) Rank the following in order of increasing (from negative to positive) cross-price elasticity of demand with coffee. Explain your reasoning. Bleach _____ Tea _____ Cream _____ Cola _____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_forwardIncome Effects depend on the income elasticity of demand for each good limit you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?arrow_forward
- (Price Elasticity of Supply) Calculate the price elasticity of supply for each of the following combinations of price and quantity supplied. In each case, determine whether supply is elastic, inelastic, perfectly elastic, perfectly inelastic, or unit elastic. a. Price falls from $2.25 to $1.75; quantity supplied falls from 600 units to 400 units. b. Price falls from $2.25 to $1.75; quantity supplied falls from 600 units to 500 units. c. Price falls from $2.25 to $1.75; quantity supplied remains at 600 units. d. Price increases from $1.75 to $2.25, quantity supplied increases from 466.67 units to 600 units.arrow_forwardEstimates 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_forwardThe quantity supplied of a good rises from 120 to 140 as price rises from 4 to 5.50. What is the price elasticity of supply of the good?arrow_forward
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How To Understand Elasticity (Economics); Author: Market Power;https://www.youtube.com/watch?v=1XXhpHJTglg;License: Standard Youtube License