MICROECONOMICS-ACCESS CARD <CUSTOM>
MICROECONOMICS-ACCESS CARD <CUSTOM>
11th Edition
ISBN: 9781266285097
Author: Colander
Publisher: MCG CUSTOM
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Chapter 6, Problem 18QE

(a)

To determine

The cross-price elasticity of demand.

(b)

To determine

Identify whether the goods are complements and substitutes.

(c)

To determine

Identify the impact on demand if the goods are substitutes.

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Mel needs your help in understanding the following problem. The price of lettuce has increased slightly from R4.00 to R5.00, causing a fall in the quantities demanded from 100 to 80 per month. However, she also noticed a decrease in the demand for tomatoes, from 150kg to 120kg, even though no price changes have occurred. Can you help her understand this behaviour by seeing if a relationship possibly exists between these two goods? [Hint: Use the elasticity coefficient as a tool for your recommendation. Show all workings. Round your answer to 4 decimal points.]
Consider the demand for shrimp shown in Figure 2. Suppose the current demand for shrimp is D (in black), the current price of a pound of shrimp is $10, and the current quantity demand of shrimp is 200K. Which of the following correctly describes an increase in the demand for shrimp, assuming the price of a pound of shrimp remains at $10?      A) The demand curve for shrimp shifts right from D to D' (blue), and the quantity demand for shrimp decreases from 200K pounds to 150K pounds.       B) The demand curve for shrimp shifts left from D to D'' (red), and the quantity demand for shrimp decreases from 200K pounds to 150K pounds.       C) The demand curve for shrimp shifts right from D to D' (blue), and the quantity demand for shrimp increases from 200K pounds to 270K pounds.       D) The demand curve for shrimp shifts left from D to D'' (red), and the quantity demand for shrimp increases from 200K pounds to 270K pounds.
Suppose the price of salt increases by 25 percent and, as a result, the quantity of pepper demanded (holding the price of pepper constant) increases by 3 percent. The cross-price elasticity of demand between salt and pepper is || (Enter your response rounded to two decim places and include a minus sign if appropriate.) In this example, salt and pepper are Instead, suppose salt and pepper were complements. If so, then the cross-price elasticity of demand between salt and pepper would be A. positive. B. negative. C. zero. D. greater than 1. E. less than – 1.
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