Suppose that x is a normal good and y is an inferior good. The Marshallian demand functions for these goods are denoted by 9x and gy, respectively. Which of the following statements about cross-price effects can we conclude with certainty? (a) (b) agx дру 8gx0 дру agy O (c) ap agy (d) ≤ 0 дрх (e) There is not enough information to conclude any of these statements.
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- Suppose that x is a normal good and y is an inferior good. The Marshallian demand functions for these goods are denoted by 9x and gy, respectively. Which of the following statements about cross-price effects can we conclude with certainty? (a) მg: дру (b) дру agy ≥ 0 (c) px (d) px agy ≥ 0 0 (e) There is not enough information to conclude any of these statements.According to Hanushek & Quigley (1980), the estimated price elasticity of demand for housing, Ed, ranges from -0.64 to -0.45. Please interpret these elasticity estimates. Is demand elastic or inelastic? How responsive is housing demand to changes in price? Assume that the housing market is in equilibrium at p° = 100 and Q° = 100. Please draw this market outcome under the separate assumptions of ɛa = -0.64 and Ea = -0.45 (i.e., draw two separate demand curves, one of which is more price elastic than the other). Be sure to label your graph accordingly.When the U.S. government announced that a domestic mad cow was found in December 2003, analystsestimated that domestic supplies would increase inthe short run by 10.4% as many other countriesbarred U.S. beef. An estimate of the price elasticity of beef demand is (Henderson, 2003).Assuming that only the domestic supply curveshifted, how much would you expect the price tochange? (Hint: See the discussion of price flexibilityin the application “The Big Freeze.”)
- Suppose that x is a normal good and y is an inferior good. The Marshallian demand functions for these goods are denoted by 9x and gy, respectively. Which of the following statements about cross-price effects can we conclude with certainty? Ꭷg« > 0 дру (a) (b) (c) agy (d) дрх (e) There is not enough information to conclude any of these statements. agr дру Əgy дрх 0 >0 ≤0Over the range from $12 to $14, Qd goes from 30 to 24. Using this range of prices and quantities, you should calculate the coefficient of price elasticity of demand. In the box labeled E1, the coefficient of price elasticity of demand is: 2 6 1.36 1.44 In box E2, you would interpret the coefficient calculated in the previous question. Therefore, you would characterize this range as: Elastic Unit Elastic Inelastic None of the AboveQ 2. (A) The monthly supply of desktop personal computers is given by the equation QS = 15,000 + 43.75P. At a price of $800, what is the price elasticity of supply? Q 2. (В) The British Automobile Company is introducing a brand new model called the "London Special." Using the latest forecasting techniques, BAC economists have developed the following demand function for the "London Special": Qр 3 1,200,000- 40P a) What is the point price elasticity of demand at prices of (a) $8,000 and (b) $10,000? b) Is it Elastic, Unit Elastic or Inelastic, Explain why?
- According to the reading "Gasoline Consumption in the US and Norway", the estimate for the long- run price elasticity of demand was Ed=1.44. We also know that there is better access to public transportation in Norway than in the US. So, this estimate likely the true long-run price elasticity of demand for gasoline. In other words, if the public transit system in Norway was the same as in the US, a 1% increase in the price of gas would reduce the quantity demanded in the long-run by. than 1.44%. (Fill in the blanks.) O Overstates, more. Overstates, less. Overstates, more. O Understates, less.Exercise : Following an increase in it's price, from 10$ to 12$, the demand for a good falls from 10500 to8100 units.What elasticity of demand would you estimate from these data? Calculate its value, first by using the general formula (for discrete changes), then by assuming a constantconstant elasticity of demand (log formula).Calculate the demand for p=9 (note q9 the quantity for p=9), using the general formula then in log of the elasticity calculated in Now, Knowing the value of the direct price elasticity of demand calculated previously, assuming constant costs andcosts and rivals not responding to your price cut, would you have recommended the price cut from 10 to 9?price cut from 10 to 9 ?ABC Manufacturing has determined that the demand function for their heated socks is given by: D(p) = 170 6 7P². ir c. At this price ($5): We would say the demand for heated socks is: Select an answer Based on this, in order to increase revenue we should: [Select an answer d. Use the Elasticity model to determine the price that maximizes revenue. (Round result to 2 decimal places.) P= =
- Transport economists Lasse Fridstrøm and Vegard Østli studied the demand for cars in Norway between 2002 and 2016. Regarding gasoline-powered cars, the own-price elasticity was −1.094, and the cross-price elasticities with respect to the prices of gasoline, electricity, and electric cars were −0.71, 0.06, and 0.19 respectively. As for electric cars, the own-price elasticity was −0.99, and the cross-price elasticities with respect to the prices of electricity, gasoline, and gasoline-powered cars were −0.18, 0.38, and 0.35 respectively.a. Referring to the above data, discuss whether gasoline cars and electricity are substitutes or complements.b. Electric cars are more expensive than gasoline cars. Compare the incomes of people who buy electric cars vis-à-vis those who buy gasoline cars.c. Considering the buyers’ incomes, explain why the demand for electric cars is less price elastic than the demand for gasoline cars.d. Why would the short-run demand for gasoline cars be less elastic with…Calculate the numerical value of cross-price elasticity, exy, in each of the following situations. Do not round your interim calculations before obtaining the final solution (i.e. do not clear your calculator). In each case, express the number to two decimal places and include a negative sign where appropriate (i.e. -1.67, not-1.7 or 1.667) but leave positive values without a plus sign (i.e. 1.67, not +1.67). Identify whether the two products in italics are substitute or complementary products. a. The price Consumer X pays each month for access to the Internet decreases from $50 to $35, causing his quantity demanded of e- magazines he reads on his computer to rise from 4 to 5. The numerical value of cross-price elasticity is The Internet and e-magazines are complementary products. b. The quantity demanded of do-it-yourself hair-cutting sets increases from 5,000 to 15,000 when the average price of a hairstylist's cut rises from $30 to $50 per hour. The numerical value of cross-price…John, a restaurant consulting firm estimates that in Accra a 10% reduction in the price of roasted groundnut will increase kelewele demand by 20%. The restaurant further estimates that a 10% reduction in price of roasted plantain will decrease kelewele by 15%. (a) What is the implied cross price elasticity of kelewele with respect to changes in the price of roasted groundnut. (a) What is the implied cross price elasticity of kelewele with respect to changes in the price of roasted plantain.