. Suppose that the market demand for coffee is Pd = 15 - Qd and the market supply is PsQs-5. What is the equilibrium price and quantity for coffee? Suppose that the government imposes a tax of $1 per unit to reduce coffee consumption and raise government revenues. What will be the new equilibrium quantity? What price will the buyer pay? What price will the seller receive?
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- Suppose you learned that the price elasticity of demand for wheat is 0.7 between the current price for wheat and a price 2 higher per bushel. Do you think that farmers collectively would try to reduce the supply of wheat and drive the price up 2 higher per bushel? Explain your answer. Assuming that they would try to reduce supply, what problems might they have in actually doing so?1. Suppose the demand for towels and supply of towels are given by the below: QD = 100 - 4P QS = P a. Find the equilibrium price and quantity using demand and supply functions above. b. Plot demand and supply curve on the same graph and point out the equilibrium quantity and price. You should draw each graph precisely with intercepts and slopes. c. Solve for the price elasticities of demand and supply at the equilibrium point. Which is more elastic: demand or supply? Simply explain why. d. Suppose there was a demand shock so that at each price 20 more towels are demanded since consumers want more. Plot the new demand curve on the graph that you derive in part (a). Find the new equilibrium price and quantity. (Hint: You may derive a new demand function by adding a constant to find a new equilibrium price and quantity.)I am trying to draw a demand curve with quantity on the y axis and price on the x axis - and to then draw the demand curve for 4 products, whose own price elasticity of demand are -0.48, -0.75, - 1.03, -1,31which of these products has the steeper demand curve
- a) Draw a hypothetical demand-and-supply diagram and show equilibrium price, equilibrium quantity, and the total revenue received by the suppliers. b) In a hypothetical situation, Government of Pakistan wants to put a curb on cigarette smoking through economic policy: i. Studies indicate that the price elasticity of demand for cigarettes is about 0.5. If a pack of cigarettes currently costs Rs.200 and the government wants to reduce smoking by 22 percent, by how much should it increase the price? ii. If the government permanently increases the price of cigarettes, will the policy have a larger effect on smoking one year from now or five years from now? iii. Studies also find that teenagers have a higher price elasticity of demand than adults. Why might this be true?Suppose the demand for new automobiles in the United States is describedby the equation Qd = 5.3 - 0.1P where Qd is the number of new automobilesdemanded per year (in millions) when P is the average price of anautomobile (in thousands of dollars).a. What is the quantity of automobiles demanded per year when the averageprice of an automobile is $15,000? When it is $25,000? When it is$35,000?b. Sketch the demand curve for automobiles. Does this demand curve obeythe law of demand?1. Consider the market for Widgets. Suppose that the equation for the supply curve is: Qs = 1,000P – 10,000, and the equation for the demand curve is: Qa = 50,000 – 2,000P. It turns out that the equilibrium price is 20, while the equilibrium quantity is 10,000. a. Use a 10% increase in quantity to estimate (crudely) both the elasticity of supply and the elasticity of demand at the equilibrium quantity. i) Categorize supply and demand as elastic or inelastic at the equilibrium quantity. ii) Is supply or demand relatively more inelastic at the equilibrium quantity? b. If the government enacted a tax of $3, the loss in consumer surplus would be 9,000, while the loss in producer surplus would be 18,000 (see Homework 2, question #2.) Compare this information to your answer to part (a). Explain. c. Now estimate (crudely) the elasticity of demand at a quantity of 11,000 by decreasing quantity by 1,000. Compare your estimate of elasticity to the estimate in part (a). Comment.
- Suppose the income elasticity of demand for food is 0.5 and the price elasticity of demand -1.0. Suppose also that your housemate Claire spends $10,000 per year on food, that the price of food is $4, and that her income is $50,000. a) If a $4 sales tax on food were to cause the price of food to double, how much food would Claire’s consume? b) Suppose she is given a state sales tax rebate of $5,000 to ease the effect of the tax. Now how much food would she eat? c) Briefly discuss how you know whether she would be better or worse off when given a rebate to the sales tax payments?Suppose a firm sells two goods, Good A and Good B. Use the following information to answer questions that follow:Profit maximising price of Good A = R200Profit maximising price of Good B = R75MC at Q* of Good A = R120Total revenue of Good A = R26000Total revenue of Good B = R24000Rothschild index of Good B = 0.4Price elasticity of the market demand for Good B = -2 2.1. Calculate each of the following:Ed of Good A = ____________Ed of Good B =__________MC at Q* of Good B = R___________ 2.2 Suppose that the firm noticed that when it increased the price of Good A from R200 to R300, the sales of Good B decreased from 1000 to 600 units. Calculate and classify the cross-price elasticity of demand between Good A and Good B.Ec =____________Good A and Good B are classified as (substitutes/compliments) 2.3. Use the elasticity coefficient calculated above and the information provided, to calculate by how much the firm’s total combined revenue will change if it decreases the price of Good A by…What is the price elasticity of demand(Using the Midpoint method) when the price changes from $10 to $13? If the Government imposes a tax of $6 per burrito, how many burritos will be sold in the market?
- The demand for stoves is given by QD=450−20P and the market supply isgiven by QS = 20 + 100Pi. In equilibrium, how many stoves would be sold and at what price? ii. What would happen if suppliers set the price of stoves at $15? Explainthe market adjustment process. iii. Using the response in part (i), calculate the price elasticity of demandfor stoves when price changes to $10.Suppose that the demand and supply schedules for raisins in South Carolina are as fallows, quantitiesare measured in millions of packs per month. What is the quantity of raisins bought if the price is 50cents ? Price (cents per pack) Quantity demanded20 18030 16040 14050 12060 10070 8080 60 a) 120b) 180c) 100a)When John can sell totem poles for 1,800 each, he markets 60 annually. when the price falls to $600 each, he is willing to sell only 24 each year. What is his price elasticity of supply ? b) government pays attention to the elasticity of demand when selecting foods and services upon which to levy excise taxes. Assume a $1.00 tax is levied on some good and 10,000 units are sold. What is the tax revenue collected ?