Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506893
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 7, Problem 3CQ
Recent research confirms that the
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
What is the sum of the own price elasticity of demand for X, the cross price elasticities, and the income
elasticity of demand for X?
Does this hold only for the given type of utility function or all well behaved utility functions?
What does this mean?
If the utility function for a consumer is defined by U=6X^3/5Y^2/5 Given that the consumer's income is 300 currency units and unit price of goods X and Y are 12 and 15 currency units respectively, calculate the equilibrium quantity of both goods.
Compute the price elasticity of demand for both goods and interpret your results.
If income and prices of the two goods increase by 50%, calculate the equilibrium quantities of both goods
In the following questions, give all your answers to two decimals.
Patrice works as an economist for the Bureau of Labor Statistics (BLS). Her current project is to estimate the
effect of changes in income, prices of related goods, and the price of potatoes on the demand for beef. Patrice has
the following data:
Price elasticity of demand for beef
-0.80
Income elasticity of demand for beef
+ 1.40
Cross-price elasticity between beef and chicken
+1.20
Cross-price elasticity between beef and potatoes
-0.50
Chapter 7 Solutions
Microeconomics: Private and Public Choice (MindTap Course List)
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
- Estimates presented in Exhibit 5 show that Android users have a higher price elasticity of demand for apps in the Google Play Store than do iPhone users in the Apple App Store. Why might Android users tend to be more sensitive to app prices than iPhone users? What categories or types of apps (for example, games/social media) do you think have the highest price elasticities?arrow_forwardSuppose Sally buys exactly five bars of English toffee each week, regardless of whether the toffee bars are regularly priced at 1 or on sale for 0.50. Based on this information, what is Sallys price elasticity of demand for English toffee in this price range? a. 0 b. 1 c. Infinity d. Cannot be determined.arrow_forward. Economists often say that goods tend to have more elastic demand when they have lots of close χδ = α + (1 - a) substitutes. Use the CES utility function U(x, y) to show that the own-price elasticity of demand for good X gets larger (in absolute value) as the elasticity of substitution gets larger.arrow_forward
- Income Elasticity. Suppose the price of a pastry cake is $4. When Maxwell’s income was $2000 per month, his monthly demand for pastry cakes was Q = 16 – 2P. When Maxwell got a pay raise and began to earn $4000 per month, his demand shifted to Q = 40 – 2P. Given this information, find Maxwell’s income elasticity for pastry cakes. Hint: You’ll first have to find the two quantities.arrow_forwardSuppose if the price of a good is $12, the quantity demanded is 50 units; when the price is $10, the quantity demanded is 100 units. Use the midpoint approach to compute the price elasticity of demand. Is demand at this point relatively responsive or relatively unresponsive to price changes?arrow_forwardA market survey revealed that the price elasticity of demand for earbuds amongst high school students is -2.35. Which of the following factors could explain this? 1) There are no substitutes available. 2) High school students prefer using earbuds to headphones. 3) Earbuds are normal goods. 4) The cost of earbuds account for a large percentage of the allowance of an average student.arrow_forward
- Suppose the income elasticity of demand for food is 0.45 and the price elasticity of demand is 1.00. Suppose also that Felicia spends $10,000 a year on food, the price of food is $2, and that her income is $ 25,000. If a sales tax on food caused the price of food to increase to $2.50, what would happen to her consumption of food? Because a large price change is involved, use the arc elasticity to measure the price elasticity of demand rather than a point elasticity. Felicia's consumption of food would decrease by units. ( Enter your response rounded to two decimal places.) Suppose that Felicia gets a tax rebate of $2,500 to ease the effect of the sales tax. What would her consumption of food be now? (Again, use an arc income elasticity to answer this question instead of a point income elasticity.) Felicia's consumption of food would now be 4,175.18 units. (Enter your response rounded to two decimal places.) Is she better or worse off when given a rebate equal to the sales tax payments?…arrow_forwardIf Beluga caviar has an income elasticity of demand which is > 0 and Ramen noodles have an income elasticity of < 0, it means that Multiple Choice The two goods are complements Beluga caviar is a normal good and Ramen noodles are an inferior good Beluga caviar has fewer substitutes than Ramen noodles Beluga caviar is an inferior good and Ramen noodles are a normal goodarrow_forwardIf a household’s marginal utility from some good falls very rapidly as it consumes more of it, is the price elasticity of its demand for the good likely to be high or low?arrow_forward
- Suppose the income elasticity of demand for food is 0.45 and the price elasticity of demand is - 1.00. Suppose also that Felicia spends $10,000 a year on food, the price of food is $2, and that her income is $25,000. If a sales tax on food caused the price of food to increase to $2.50, what would happen to her consumption of food? Because a large price change is involved, use the arc elasticity to measure the price elasticity of demand rather than a point elasticity. Felicia's consumption of food would decrease by 1000.00 units. (Enter your response rounded to two decimal places.) Suppose that Felicia gets a tax rebate of $2,500 to ease the effect of the sales tax. What would her consumption of food be now? (Again, use an arc income elasticity to answer this question instead of a point income elasticity.) Felicia's consumption of food would now be 4,175.18 units. (Enter your response rounded to two decimal places.) Is she better or worse off when given a rebate equal to the sales tax…arrow_forwardIf the cross-price elasticity of demand for good X with respect to good Y equals 0, how is that value interpreted? These goods are complements, and the quantity demanded of good X increases if the price of good Y decreases. These goods are unrelated, and a change in the price of good Y has no effect on the quantity of good X demanded. These goods are normal goods, and a change in buyers income increases the quantity demanded of good X. These goods are substitutes, and the quantity demanded of good X decreases if the price of good Y decreases.arrow_forwardRalph consumes apples (A) and bananas (B). His Marshallian demand for bananas is 10.5 p0.2 6p0:7 B* = (a) Find and interpret the income elasticity of demand for bananas (eğ,1) and interpret the value. Are bananas an inferior or normal good? (b) Find the own price elasticity of demand for bananas (¤Â‚Ãß) and interpret the value. Does the own price elasticity of demand for bananas depend on the value of PB? (c) Find the cross price elasticity of demand for bananas (е‚Ã) and interpret the value. Are bananas and apples gross substitutes or gross complements?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Forecasting: Exponential Smoothing, MSE; Author: Joshua Emmanuel;https://www.youtube.com/watch?v=k_HN0wOKDd0;License: Standard Youtube License