EBK ECON MICRO
6th Edition
ISBN: 9781337671828
Author: MCEACHERN
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 5, Problem 2P
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1. When the price of butter increases from $1 to $2, the quantity demand of margarine
increases from 6 to 8. What is the cross-price elasticity of demand?
A) (6-8)/8
(1-2)/2
(8-6)/6
(2-1)/₁
(1-2)/2
(8-6)/
B)
D) (2-1)/₁
(6-8)/8
Question
Suppose that business travelers and vacationers have the following demand for airline tickets from Karachi to Dubai:
Price
Quantity Demanded
(Business Travelers)
Quantity Demanded
(vacationers)
$150
2100 Tickets
1000 Tickets
$200
2000
800
$250
$300
1900
1800
600
400
As the price of tickets rises from $150 to $200, what is the price elasticity of demand for (i) business travelers and (ii) vacationers? (Use the midpoint method in your calculations.)
Chapter 5 Solutions
EBK ECON MICRO
Ch. 5 - (Calculating Price Elasticity of Demand) Suppose...Ch. 5 - (Price Elasticity and Total Revenue) Fill in the...Ch. 5 - (Categories of Price Elasticity of Demand) For...Ch. 5 - Prob. 4PCh. 5 - (Determinants of Price Elasticity) Would the price...Ch. 5 - (Price Elasticity of Supply) Calculate the price...Ch. 5 - (Cross-Price Elasticity) Rank the following in...Ch. 5 - Prob. 8PCh. 5 - (Other Elasticity Measures) Complete each of the...
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- What is the formula for line cross-price elasticity of demand?arrow_forwardFrom the data in Table 5.5 about demand for smart phones, calculate the price elasticity of demand from: point B to point C, point D to point E, and point G to point H. Classify the elasticity at each point as elastic, inelastic, or unit elastic.arrow_forwardSuppose you could buy shoes one at a time, miter than in pain. What do you predict the cross-price elasticity for left shoes and right shoes would be?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_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_forwardWhat is the price elasticity of demand? Can you explain it in your own words?arrow_forward
- Question 4The Pear company sells a smart phone for $250. Its sales have averaged 8,000 units per month over the last year. Recently, its closest competitor Banana company reduced the price of its smart phone from $350 to $300. As a result, Pear’s sales declined by 1,500 units per month. (a) What is the cross price elasticity of demand between the Pear and Banana smart phone? Use the averaging formula. What does this indicate about the relationship between the two products? (b) If the Pear company knows that the price elasticity of demand for its phone is -1.5, what price would the Pear company have to charge to sell the same number of units as it did before the Banana company price cut? Assume that Banana company holds its price of its phone constant at $300. Use the averaging formula.arrow_forwardQuestion 1: Point Price Quantity Demanded A $1.50 1,000 B $3.00 950 C $4.50 900 D $6.00 850 E $7.50 800 The market price for bulgogi was $3.00. However, it is now $6.00. Use the midpoint method to calculate the price elasticity of demand ( ) for bulgogi. How sensitive is the quantity demanded bulgogi to price changes? Please explain briefly. For this question use the price elasticity of demand calculated in part (a). If the price of bulgogi increases by 20%, how much will the quantity demanded change by?arrow_forwardExplain how and why price elasticity of demand changes as a product is defined more narrowly or more broadly. Cite an example to help support your answer. Edit View Insert Format Tools Tablearrow_forward
- Price (dollars) 15 B 10 5 D 50 100 150 200 250 Quantity (units) In the figure above, using the midpoint method, what is the price elasticity of demand between points A and B? A) 2.33 B) 1.00 C) 0.43 D) 0.13 20arrow_forwardThe Pear company sells a smart phone for $250. Its sales have averaged 8,000 units permonth over the last year. Recently, its closest competitor Banana company reduced the priceof its smart phone from $350 to $300. As a result, Pear’s sales declined by 1,500 units permonth.(a) What is the cross price elasticity of demand between the Pear and Banana smart phone?Use the averaging formula. What does this indicate about the relationship between the twoproducts?(b) If the Pear company knows that the price elasticity of demand for its phone is -1.5, whatprice would the Pear company have to charge to sell the same number of units as it did beforethe Banana company price cut? Assume that Banana company holds its price of its phoneconstant at $300. Use the averaging formula.arrow_forwardRefer to the accompanying graph. What is the price elasticity of demand at point A? Price ($) 0000 0 0.2 0.33 3 2 A Quantity (in thousands) D 16arrow_forward
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