Whether the price elasticity of demand for ford SUVs will increase, decrease or remain the same when each of following events occurs. 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.

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Answer 1

Question

Chapter 5, Problem 1P

To determine

To explain:

Whether the price elasticity of demand for ford SUVs will increase, decrease or remain the same when each of following events occurs.

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.

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Short Description Fiscal Policy Graph Details Shown is a Fiscal Policy diagram with the variable Real GDP (billions of dollars) on the x-axis and the variable Price Level on the y-axis. The x-axis is scaled from 0 to 800 billion dollars with an increment of 40 billion dollars, and the y-axis is scaled from 30 to 150 units with an increment of 5 units. Object Details On the graph we have:Four Line Objects:An upward sloping Aggregate Supply, AS line with two endpoints:Point 1 at (160, 70)Point 2 at (720, 140)A downward sloping Aggregate Demand, AD1 line with two endpoints:Point 1 at (80, 110)Point 2 at (640, 40)A vertical Long-run Aggregate Supply, LRAS with two endpoints:Point 1 at (400, 145)Point 2 at (400, 30)A downward sloping Aggregate Demand, AD line with two endpoints:Point 1 at (720, 60)Point 2 at (160, 130)Two Reference Points:Lines AS, AD, and LRAS intersect at (400, 100)Lines AS and AD1 intersect at (280, 85) a. How much does aggregate demand need to change to restore the…

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a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ billion b. If the MPC is 0.6, how much does government purchases need to change to shift aggregate demand by the amount you found in part a? $ billion Suppose instead that the MPC is 0.95. c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and government purchases need to change by $ billion.

Answer 2

Question

Chapter 5, Problem 1P

To determine

To explain:

Whether the price elasticity of demand for ford SUVs will increase, decrease or remain the same when each of following events occurs.

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.

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Answer 3

Question

Chapter 5, Problem 1P

To determine

To explain:

Whether the price elasticity of demand for ford SUVs will increase, decrease or remain the same when each of following events occurs.

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.

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Answer 4

Question

Chapter 5, Problem 1P

To determine

To explain:

Whether the price elasticity of demand for ford SUVs will increase, decrease or remain the same when each of following events occurs.

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.

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Answer 5

Chapter 5, Problem 1P

To determine

To explain:

Whether the price elasticity of demand for ford SUVs will increase, decrease or remain the same when each of following events occurs.

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.

Answer 6

Chapter 5, Problem 1P

To determine

To explain:

Whether the price elasticity of demand for ford SUVs will increase, decrease or remain the same when each of following events occurs.

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.

Answer 7

Chapter 5, Problem 1P

To determine

To explain:

Whether the price elasticity of demand for ford SUVs will increase, decrease or remain the same when each of following events occurs.

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.

Answer 8

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.