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
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Question
Chapter 7, Problem 11CQ
To determine
Meaning of more elastic demand for a product.
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Tracey usually pays a price between $6 and $10 per pound of rice. Her monthly total expenditure on rice increases as the price decreases. What does this implyabout her price elasticity of demand for rice?
If Neil's elasticity of demand for hot dogs is constantly 0.9, and he buys 4 hot dogs when the price is $1.50 per hot dog, how many will he buy when the price is $1.00 per hot dog?
This time, we are using elasticity to find quantity, instead of the other way around. We will use the same formula, plug in what we know, and solve from there.
Jenny's weekly income increases from $500 to $650. As a result, she goes out for dinner one day a week instead of one day every other week. What is Jenny's income elasticity of demand for restaurant dinners?
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Microeconomics: Private and Public Choice (MindTap Course List)
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- Maria has decided always to spend one third of her income on clothing. a. What is her income elasticity of clothing demand? b. What is her price elasticity of clothing demand? c. It Marias tastes change and she decides to spend only one fourth of her income on clothing, how does her demand curve change? What is her income elasticity and price elasticity now?arrow_forwardEstimates 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_forwardEconomists define normal goods as having a positive income elasticity. 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. Can you come up with a name for each category?arrow_forward
- Income Effects depend on the income elasticity of demand for each good limit 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?arrow_forwardNadia consumes two goods, food and clothing. The price of food is $2, the price of clothing is $5, and her income is $1,000. She always spends 40% of her income on food regardless of the price of food, clothing, or her income. What is her price elasticity of demand for food? What is her cross-price elasticity of demand for food with respect to clothing? What is her income elasticity of demand for food?arrow_forwardWe 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.arrow_forward
- Jonathan's income falls by 15%. He decides to cut down his purchases of high-end restaurant meals by 20%. His income elasticity of demand for high-end restaurant meals is and meals at high-end restaurants are a good for Jonathan.arrow_forwardDaria's income decreases from £80,000 to £54,000 per year. As a result, she increased her demand for take-away food by 30 percent and decreased her demand for new clothes by 20 percent. a) Calculate Daria's income elasticity of demand for (i) take-away food and (ii) new clothes. b) Comment on the nature of both items. In a newspaper article you read that the price for shirts increased by 23% and the demand for pullovers rose by 9%. c) State the type of elasticity you can calculate. Calculate the elasticity and discuss the economic intuition of your result. d) The newspaper looked at historical data and noticed that the elasticity calculated in part (c) increases. What does this imply for the relationship between shirts and pullovers?arrow_forward
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