indicator of inferior goods indicator of substitute 1. cross-price elasticity > 0 goods 2. cross-price elasticity < 0 indicator of complementary goods 3. cross-price elasticity = 0 %3D indicator of necessity goods 4. 0< income elasticity < 1 indicator of unrelated 5. income elasticity < 0 goods 6. income elasticity > 1 perfectly elastic 7. vertical supply curve perfectly inelastic 8. horizontal demand curve indicator of luxury goods

indicator of inferior goods indicator of substitute 1. cross-price elasticity > 0 goods 2. cross-price elasticity < 0 indicator of complementary goods 3. cross-price elasticity = 0 %3D indicator of necessity goods 4. 0< income elasticity < 1 indicator of unrelated 5. income elasticity < 0 goods 6. income elasticity > 1 perfectly elastic 7. vertical supply curve perfectly inelastic 8. horizontal demand curve indicator of luxury goods

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1) Why should we study elasticity? 2) What are normal goods and inferior goods? Discuss within the context of income elasticity of demand.
1. Yesterday, the price of gloves was $4 a box, and Reena was willing to buy 10 boxes. Today, the price has gone up to $6 a box, and Reena is now willing to buy 8 boxes. Is Reena's demand for gloves elastic or inelastic? What is Reena's price elasticity of demand? See formula below Price Elesticity of Demand (PED)- Xchange in Q.D. % change in Price
The accompanying table lists the cross-price elasticities of demand for several goods, where the percent quantity change is measured for the first good of the pair, and the percent price change is measured for the second good. ( please see image) a. Explain the sign of each of the cross-price elasticities. What does it imply about the relationship between the two goods in question? b. Compare the absolute values of the cross-price elasticities and explain their magnitudes. For example, why is the cross-price elasticity of McDonald’s burgers and Burger King burgers less than the cross-price elasticity of butter and margarine? c. Use the information in the table to calculate how a 10% increase in the price of Pepsi affects the quantity of Coke demanded. d. Use the information in the table to calculate how a 5% decrease in the price of gasoline affects the quantity of SUVs demanded.
If the cross-price elasticity between ketchup and hamburgers is –1.2, a 4% increase in the price of ketchup will lead to a 4.8%* drop in quantity demanded of ketchup. drop in quantity demanded of hamburgers. increase in quantity demanded of ketchup. Increase in quantity demanded of hamburgers. If the price of pork chops falls from $8 to $6, and this leads to an increase in demand for apple sauce from 100 to 140 jars, what is the cross-price elasticity of apple sauce and pork chops at a pork chop price of $6?* -1.17 2.71 0.42 -0.86 An income elasticity less than zero tells us that the good is:* a normal good. a Giffen good. an inferior good. an inelastic good.
When Alex's income increased from $7,000 to $9,000, he increased his consumption of bagels from 5 to 9 a month and decreased his consumption of donuts from 15 to 9 a month. Calculate Alex's income elasticity of demand for bagels and donuts. >>> Answer to 2 decimal places. >>> If your answer is negative, include a minus sign. If your answer is positive, do not include a plus sign. Alex's income elasticity of demand for bagels is? Alex's income elasticity of demand for donuts is?
We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category-explain your reasoning for each categorization.
If the price elasticity of demand for used carspriced between $3,000 and $5,000 is 2 1.2 (usingthe mid-point method), what will be the percentchange in quantity demanded when the price of aused car falls from $5,000 to $3,000?
Given below are the annual demand for movie tickets for youngadults with differing annual income:a) Calculate the price elasticity of demand for both income when price increasesfrom $8 to $10.b) Calculate the income elasticity of demand if the person earning $20,000annually has an increase in income to $24,000 for price $12 and price $16.3Price($)Quantity demanded(income $20,000)Quantity demanded(income $24,000)8 40 5010 32 4512 24 3014 16 2016 8 12
What is the relationship between price elasticity and position on the demand curve? For example, as youmove up the demand curve to higher prices and lower quantities, what happens to the measured elasticity? How would you explain that? Income effects depend on the income elasticity of demand for each good that you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?
What is the relationship between price elasticity and position on the demand curve? For example, as youmove up the demand curve to higher prices and lower quantities, what happens to the measured elasticity? How would you explain that? Income effects depend on the income elasticity of demand for each good that you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy? Needs explanation
When Alex's income was $6,000, he bought 2 bagels and 12 donuts a month. Now his income is $8,000 and he buys 6 bagels and 6 donuts a month. Calculate Alex's income elasticity of demand for bagels and donuts. >>> Answer to 2 decimal places. >>> If your answer is negative, include minus sign. If your answer is positive, do not include a plus sign. Alex's income elasticity of demand for bagels is 2.33. C
Question 3 a. Calculate the cross-price elasticity of demand for porridge oats and milk sold in a supermarket if at the end of last period, the price of the porridge oats rose from $150 to S210 and the demand for milk sold, moved from 200 units sold to 180 units. State whether you think these two goods are complements or substitutes. b. Consider the case where the manager of KFC finds that the number of two-piece meals consumed per week fell from 1200 to 1000 boxes when the price of its meals was increased from $400 to $520. i) Calculate the price elasticity of demand. Show your calculations. ii) If the KFC manager wishes to raise revenue, what is the appropriate action to take? (4 marks) c. Given that the demand function for banana chips may be written Qd=200-3p, where p is the price for banana chips, and the supply may be written as Qs= 30+2p. Determine the equilibrium price and quantity