(a)
The elasticity of the given good which is cars or Chevrolets and the reason behind it with respect to the determinant of
Answer to Problem 1P
Cars have elastic demand and Chevrolets have
Explanation of Solution
The good which have more substitutes will be more inelastic and the one with less substitutes is more elastic. Cars have less close substitutes so it will have elastic demand and Chevrolets have more substitutes likes Ford, Suzuki so it will have inelastic demand.
Here, the responsible determinant will be availability of substitute's goods.
Concept Introduction:
(b)
The elasticity of the given good which is salt or housing and the reason behind it with respect to the determinant of demand.
Answer to Problem 1P
Housing will have elastic demand and Salt will have inelastic demand. The determinant of demand which is responsible is Nature of Commodity.
Explanation of Solution
Salt is the necessity good and if its price increases, the demand would not change because it does not have any substitute so it has inelastic demand. Housing will have elastic demand because its price change will have huge effect on demand.
Here, the responsible determinant will be Nature of Commodity.
Concept Introduction:
Elasticity of demand is the measure of change of responsiveness in the quantity demanded due to change in the price. It can be represented as the ratio of percentage change in quantity demanded and percentage change in the price. It implies that how the behavior of people change due to change in the price.
(c)
The elasticity of the given good which is New York Met games or a Cleveland Indians Games and the reason behind it with respect to the determinant of demand.
Answer to Problem 1P
New York met games will have elastic demand and Cleveland games will have inelastic demand. The determinant of demand which is responsible is proportion of Income spent on a Commodity.
Explanation of Solution
New York met games will be cheaper as they are played locally. So this good will have elastic demand. Cleveland games will require the travel cost also. Hence, they have inelastic demand.
Here, the responsible determinant will be proportion of Income spent on a Commodity.
Concept Introduction:
Elasticity of demand is the measure of change of responsiveness in the quantity demanded due to change in the price. It can be represented as the ratio of percentage change in quantity demanded and percentage change in the price. It implies that how the behavior of people change due to change in the price.
(d)
The elasticity of the given good which is Natural gas this month or over the course of the year and the reason behind it with respect to the determinant of demand.
Answer to Problem 1P
Natural gas this month will have inelastic demand and for over the course of year will have elastic demand. The determinant of demand which is responsible is Time adjustment factor.
Explanation of Solution
Natural gas for over the course of year will have more time to adjust and find more substitutes. Hence, demand will be elastic and natural gas this month will have inelastic demand.
Here, the responsible determinant will be Time adjustment factor.
Concept Introduction:
Elasticity of demand is the measure of change of responsiveness in the quantity demanded due to change in the price. It can be represented as the ratio of percentage change in quantity demanded and percentage change in the price. It implies that how the behavior of people change due to change in the price.
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Chapter 6 Solutions
EXPLORING ECONOMICS
- Answer in step by step with explanation. Don't use Ai.arrow_forwardUse the figure below to answer the following question. Let I represent Income when healthy, let I represent income when ill. Let E [I] represent expected income for a given probability (p) of falling ill. Utility у в ULI income Is есте IM The actuarially fair & partial contract is represented by Point X × OB A Yarrow_forwardSuppose that there is a 25% chance Riju is injured and earns $180,000, and a 75% chance she stays healthy and will earn $900,000. Suppose further that her utility function is the following: U = (Income) ³. Riju's utility if she earns $180,000 is _ and her utility if she earns $900,000 is. X 56.46; 169.38 56.46; 96.55 96.55; 56.46 40.00; 200.00 169.38; 56.46arrow_forward
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- Sam's profit is maximized when he produces shirts. When he does this, the marginal cost of the last shirt he produces is , which is than the price Sam receives for each shirt he sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize his profit) is , which is than the price Sam receives for each shirt he sells. Therefore, Sam's profit-maximizing quantity corresponds to the intersection of the curves. Because Sam is a price taker, this last condition can also be written as .arrow_forwardWhy must total spending be equal to total income in an economy? Total income plus total spending equals total output. The value-added measurement of GDP shows this is true. Every dollar that someone spends is a dollar of income for someone else. all of the abovearrow_forwardLabor Market Data Price $5 $10 $15 $20 $25 3,000,000 6,000,000 9,000,000 12,000,000 15,000,000 Qd 15,000,000 12,000,000 9,000,000 6,000,000 3,000,000 Price $30 $25 $20 $15 $10 $5 + +- x- 3 6 Do + + F 9 12 15 Quantity (In millions) Area of a triangle = 1/2* base *height Market Efficiency & Total Surplus Worth Publishers SCENARIO: The state government is considering raising the minimum wage from $15 per hour to $20 per hour over the next 3 years. As an economic advisor to the governor, you have been asked to provide a recommendation on whether the minimum wage should be increased based on economic theory. Consider the labor market data provided. Prepare a brief report that: 1. Explains whether the labor market is currently efficient at the equilibrium wage of $15 per hour. How would you know? At equilibrium, what (dollar amount) is the Total Surplus this market provides? Show your rationale with numbers. 2. Analyzes the impact on total surplus in the market if the minimum wage is raised…arrow_forward
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