Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 7, Problem 7PA
Subpart (a):
To determine
The impact of falling prices of flat screen TVs.
Subpart (b):
To determine
The impact of falling prices of flat screen TVs.
Subpart (c):
To determine
The impact of falling prices of flat screen TVs.
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The elasticity of Supply is an important concept in Microeconomics as it relates to a business's ability to adjust its production and its production facility in response to market developments. Think of some examples of products and businesses that would have various degrees of Elasticity of Supply and share them here.
For example, what would be the Elasticity of Supply for an original piece of art? What does this imply for the adjustment in this market to a change in Demand?
How would you describe the Elasticity of Supply for a product such as peaches, plums, and other tree fruit? Consider first a brief period, such as weeks, and next a much longer period such as five years. How does the time horizon influence market adjustment when there is a change in Demand?
Draw a graph that indicates what happens in the market for hybrid cars when the price of gasoline increases from $2.50 to $5.00 per gallon. Answer the following questions: a) Does equilibrium output rise or fall? b) Does equilibrium price rise or fall? c) Suppose the supply of hybrid cars is perfectly inelastic. Draw a new graph and explain if and how the elasticity of supply changes your answers to parts “a” and “b”.
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Consider a market that can be represented by a
linear demand curve, QD = 200 – 2PD, (where QD
is the quantity demanded and PD is the price that
demanders pay) and a linear supply curve that QS
= ½ PS (where QS is the quantity supplied and PS
is the price that suppliers get).
a. What is the equilibrium price?
b. What is the equilibrium quantity?
c. What is demand elasticity at the equilibrium
point?
Chapter 7 Solutions
Principles of Microeconomics
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- Suppose that when price is 10, quantity supplied is 20 units, and when the price is 6, the quantity supplied is 12 units. What is the price elasticity of supply? a. 0.5 b. 0.8 c. 1.0 d. 1.5arrow_forwardThe graph below represents the supply of Good X. The numbers on the chart show the percent changes in price and quantity moving along the supply curve. The numbers below the horizontal lines indicate the percent change in quantity, while the numbers to the right of the vertical lines indicate the percent change in price. c Price Supply E D 35% 25% 30% 30% B A 32% 30% 37% 35% Show Transcribed Text Quantity Which portion of the supply curve for Good A is unitary elastic? Select the correct answer below: Point A to Point B Point B to Point C Point C to Point D Point D to Point Earrow_forwardGasoline & Politics In the spring of 2008, Senators John McCain and Hillary Clinton (who were then running for president) proposed a temporary elimination of the federal gasoline tax, effective only during the summer of 2008, in order to help consumers deal with high gasoline prices. Assume that during the summer, when gasoline demand is high because of vacation driving, gasoline refiners are operating at full capacity. What does this assumption suggest about the price elasticity of supply? In light of your answer to the previous question, whom do you predict would benefit from the temporary gas tax holiday?arrow_forward
- In the last six months, the price of fuel for cars has increased very substantially in many countries. Explain why we might expect demand to be more price elastic in the long-run than in the short-run.arrow_forwardThe average ticket price for a concert at the opera house was $30. The average attendance was 5000. When the ticket price was raised to $33, attendance declined to an average of 4700 persons por performance. What should the ticket price be to maximize revenue for the opera house? (Assume a linear demand curve.) To maximize revenue, the price should be $ por ticket. (Type an integer or decimal rounded to two decimal places as needed. Simplify your answer.)arrow_forwardThe graph shows the supply and demand curves for a certain product, which has a current selling price of $ 500. The laws of supply and demand most support which conclusion about the product?arrow_forward
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