(Hand in) The elasticity of demand in the market for softdrinks is known to be ED = -1. It is known that if the government would implement a one dollar per gallon tax, then the price paid by consumers would go up by 0.8 dollars per gallon. Calculate the elasticity of supply Es.
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- 11.) In the market for cars, the price elasticity of supply is +1.5, and the price elasticity ofdemand is -0.8. The equilibrium price is $ 30 thousand, and quantity is 120 million.(a) Assuming supply and demand are linear, reconstruct and draw the supply and demandcurves. Label the intercepts.(b) To reduce traffic, the government imposes a $400 tax on cars. What are PB and PS after thetax? What is the new equilibrium quantity? Illustrate them on the same graph.(c) How big is the change in consumer surplus, producer surplus, government revenue, anddeadweight loss?Price (dollars per bushel) Quantity Demanded (bushels) 10 0. B. 8. 4. 6. 8. 4. 12 2. 16 (1) The table above gives the demand schedule for peas. As you move from point A to point B, what is the price elasticity of demand? (I) The table above gives the demand schedule for peas. As you moOve from point C to point D, what is the price elasticity of demand? () The table above gives the demand schedule for peas. As you move from point C to point D, what is the changes of the total revenue?4. (a) Profit-maximizing price must equal p = S MC, where e is the price elasticity of demand. What are the requirements for this condition to hold? In other words, explain both the necessary and sufficient conditions and the requirement related to e. (b) Show that for an elastic demand, by lowering the price profits may go up or down; for an inelastic demand loweing the price must lower the profits. What happens when the elasticity is 1 and price is lowered or raised? (c) Show that for a linear demand, p = a – bQ, the elasticity is changing from o to 0 as price decreases (quantity increases) but the slope is constant; but for the demand function Q = 100/P, the elasticity is constant but the slope is changing.
- 1. The American Mining Company is interested in obtaining quick estimates of the supply and demand curves for coal. The firm's research department informs you that the elasticity of supply is approxi- mately 1.7, the elasticity of demand is approximately -0.85, and the current price and quantity are $41 and $1,206, respectively. Price is measured in dollars per ton, quantity is captured as number of tons per week. (a) Is demand elastic, inelastic or unit elastic? Explain (b) Write down the linear supply and demand curves at the current price and quantity. (c) Using Excel, provide a graph of the demand and supply curves. Is the market in equilibrium? (d) Calculate the Total Revenue, Average Revenue, and Marginal Revenue of the American Mining Company at the equilibrium price and quantity.7. Which of the following statements is (are) correct? (x) If the coefficient of price elasticity of demand has a value of 1, then the absolute value of the percentage change in price equals the absolute value of the percentage change in quantity demanded. (y) The coefficient of price elasticity of demand for a vertical demand curve equals zero because the quantity demanded does not change as the price changes. (z) The midpoint method is used to compute elasticity because it gives the same answer regardless of the direction of change A. (x), (y) and (z) В. (x) and (y) only C (x) and (z) only D (y) and (z) only E. (z) only1. Use the Elasticity formula to calculate values of Elasticity for all the situations below. PRICE QUANTITY STEP 1 STEP 2 % CHANGE IN P STEP 3 PRICE ELACTICITY OF % CHANGE IN Od DEMAND Initial new Initial new 25 100 40 40 70 120 90 200 220 80 64 50 75 150 135 In each case, identify whether you would describe it as elastic / unit elastic / inelastic and why? 1. 2. 3. 4. 030
- -x 230. If the demand Curve is the form of P= 10e ? where P is the price and x is the demand, what is the Price elasticity of Demand? (a) Kx (b) 는 (c) 5x (d) None2. (a) Suppose that business travelers and vacationers have the following demand for airline tickets. Quantity Demanded (vacationers) 1000 tickets Price Quantity Demanded (business travelers) 2100 tickets $150 200 250 2000 800 1900 1800 600 300 400 As the price of tickets rises from $200 to $250, what is the price elasticity of demand for (i) business travelers and (ii) vacationers? (Use the midpoint method in your calculations & interpret the results) Why might vacationers have a different elasticity from business travelers? (b) “A good harvest will generally lower the income of farmers". Ilustrate this proposition using a supply and demand diagram. GOOD LUCK2. (a) Suppose that business travelers and vacationers have the following demand for airline tickets. Quantity Demanded Quantity Demanded (vacationers) 1000 tickets Price (business travelers) 2100 tickets $150 200 2000 800 250 1900 600 300 1800 400 As the price of tickets rises from $200 to $250, what is the price elasticity of demand for (i) business travelers and (ii) vacationers? (Use the midpoint method in your calculations & interpret the results) Why might vacationers have a different elasticity from business travelers? (b) "A good harvest will generally lower the income of farmers". Illustrate this proposition using a supply and demand diagram.