ESSENTIALS OF ECONOMICS
4th Edition
ISBN: 9781464188466
Author: KRUGMAN
Publisher: Norton, W. W. & Company, Inc.
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 5, Problem 1P
To determine
To explain:
Whether the
Concept Introduction:
Price Elasticity of Demand: Price elasticity of demand stands for the change in the quantity demanded due to the change in the price of a good or service. If a small change in price causes a large change in quantity, then the good or service is said to be elastic. If a change in price causes little or no change in quantity, then the good or service is said to be inelastic.
Expert Solution & Answer
Explanation of Solution
(a) Other car manufacturers decide to make and sell car S.
- The price elasticity of demand for Company F’s car S will increase if the other car manufacturers decide to make and sell car S.
- This is because buyers will have a substitute to Company F cars and as a result the price elasticity of demand will increase.
Conclusion:
The elasticity will increase.
(b) Car S produced in foreign countries are banned from markets.
- The price elasticity of demand for Company F’s car S will decrease if the car S produced in foreign countries is banned from the market.
- This is because buyers will not have a substitute to Company F cars and as a result the price elasticity of demand will decrease.
Conclusion:
The elasticity will decrease.
(c) Car S much safer than ordinary passenger cars.
- The price elasticity of demand for Company F’s car S will decrease if car S is believed to be much safer than ordinary passenger cars.
- This is because buyers will believe that there are no close substitutes to Company F’s car S and as a result the price elasticity of demand will decrease.
Conclusion:
The elasticity will decrease.
(d) New models such as four-wheel drive cargo vans appear.
- The price elasticity of demand for Company F’s car S will increase if there are new models available over time.
- This is because buyers will have substitutes to Company F’s car S and the demand of car S will decrease. As a result, the price elasticity of demand will increase because the change in quantity is larger than the change in price.
Conclusion:
The elasticity will increase.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
What is the argument about necessary evil?
What are the consequences of declining houses prices?
Q1 Explain what economic catch 22 is.
Q2 What are the consequences of declining houses pricing?
Q3 What is the argument about necessary evil?
Q4 Explain the idea of irrational exhuberance?
Q5 Explain what was the economic paradox?
Chapter 5 Solutions
ESSENTIALS OF ECONOMICS
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- < Files 9:10 Fri Mar 21 Chapter+11-Public+Goods+and+Common+Res... The Economic Catch-22 By Robert J. Samuelson We are now in the "blame phase" of the economic cycle. As the housing slump deepens and financial markets swing erratically, we've embarked on the usual search for culprits. Who got us into this mess? Our investigations will doubtlessly reveal, as they already have, much wishful thinking and miscalculation. They will also find incompetence, predatory behavior and probably some criminality. But let me suggest that, though inevitable and necessary, this exercise is also simplistic and deceptive. -- business It assumes that, absent mistakes and misdeeds, we might remain in a permanent paradise of powerful income and wealth growth. The reality, I think, is that the economy follows its own Catch-22: By taking prosperity for granted, people perversely subvert prosperity. The more we managers, investors, consumers - think that economic growth is guaranteed and that risk and…arrow_forward2.) Using the line drawing tool, plot and label the isocost line. Carefully follow the instructions above, and only draw the required objects. FILL IN BLANK d. Now suppose the price of labour rises to $5 per unit, but the firm still wants to produce 500 tires per day. Explain how a cost-minimizing firm adjusts to this change (with no change in technology). A cost-minimizing firm will be producing on ▼ The samedifferently slopedparallel isocost line. The firm will use ▼ moresameless labour and ▼ less the same amount of more capital and produce on ▼ a higher point on the same a lower point on the same a lower a higher isoquant curve.arrow_forwardQK Using the graph on the right, determine how the firm should change the quantity of the production factors in order to reduce the costs. The firm that is producing at point A can reduce its costs for producing 2000 units by employing A. same capital and more labour. B. less capital and more labour. ○ C. less capital and the same labour. D. more capital and more labour. OE. more capital and less labour. C A B Q =4000 Q = 2000 C Isocost line QLarrow_forward
- PL Suppose the price ratio is the same along isocost PK lines A and B. In the figure at right, the difference between isocost line A and isocost line B is that A. the total cost is larger along B. B. the total cost is larger along A. OC. labour is relatively more expensive along A. ○ D. the level of output is lower along A. OE. both capital and labour are relatively cheaper along A. Capital B Labourarrow_forwardUsing the graph on the right, determine the per unit prices of capital and labour. 20- Given the information provided about the isocost lines, we know that the per unit price of capital is TC=$100 and the per unit price of labour is 16- TC $80 ○ A. $50; $20 ○ B. $2; $5 ○ C. $5; $2 ○ D. $20; $50 E. not determinable; not determinable Quantity of K 12 TC $60 TC $40 0 10 20 30 Quantity of L 40arrow_forwardThe diagram to the right contains isocost lines A and B. If the price of capital is the same for both lines, then the difference between isocost line A and isocost line B is that OA. the total cost is larger along B. B. the level of output is lower along A. C. both capital and labour are cheaper along A. OD. labour is more expensive along A. ○ E. labour is more expensive along B. Capital Labourarrow_forward
- For the firm whose cost curves are shown at right, the minimum efficient scale is ○ A. between 60 and 140 units of production. OB. about 20 units of production. OC. about 60 units of production. OD. about 100 units of production. OE. the level of fixed cost corresponding to SRATC2. SRATC₁ LRAC SRATC4 SRATC₂ SRATC3 เนด เad iso C 20 20 40 60 80 100 120 140 160 180 200 Output per Periodarrow_forwardSRATC₂ SRATC3 In the figure, increasing long-run average total costs for the firm are confined to the output range OA. where the LRAC curve is downward sloping. B. above 80 units of output. O C. above 50 units of output. OD. between 50 and 80 units of output. SRATC₁ OE. between 10 and 100 units of output. ---- SRATC LRAC 10 20 30 40 50 60 70 80 90 100 Output per Periodarrow_forwardFor the firm whose cost curves are shown at right, the minimum efficient scale is OA. between 10 and 50 units of production. OB. about 80 units of production. O C. the level of fixed cost corresponding to SRATC₁. OD. about 10 units of production. ○ E. about 50 units of production. Cost per Unit SRATC₁ LRAC SRATC2 SRATC4 SRATC3 10 20 30 40 50 60 70 80 Output per Period 90 100arrow_forward
- • 3 different people working at any companies under the BPO industry in the Philippines. • What are the 3 different Vision, Mission, Duties and Responsibilities and Career Path of these people in their companies under the BPO industry?arrow_forwardModule 6 ⚫(1902) Buckner C X | (1902) How to d x (1902) Buckner F X (1902) Productic X WP Videoplayer Canvas Login | Ir x | + Σ R mybrcc.instructure.com/courses/417310/discussion_topics/3420114?module_item_id=20155705 Spring 2025 Home Announcements Modules Syllabus Grades 8 People BRCC-_Library DLASC Module 6 Discussion - Business Costs Relaunch to update For this discussion, think about where you work or a business you have a significant amount of knowledge about. What is a common product that the business sells? What are the main costs the business has to incur in order to be able to sell that product? Which of these costs are fixed and which are variable? How much additional costs would be incurred if it were to sell one additional unit of that product (marginal cost)? Write a discussion thread about this business, the product it commonly sells, and your answers to the above questions. Also, respond to at least two threads created by your classmates. In these responses, share what…arrow_forwardRefer to the video to answer the following: • what are all the key policies or all the strategies the Philippine government should prioritize to accelerate sustainable economic growth? • these should consider the Philippines current economic challenges, including inflation, unemployment, and the need for digital transformation. "The Philippines' Strong Economic Growth" (YouTube link: https://youtu.be/1YtEoGp2ZeM?siJQfIv5kbu0txVsLL.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education
How To Understand Elasticity (Economics); Author: Market Power;https://www.youtube.com/watch?v=1XXhpHJTglg;License: Standard Youtube License