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- 1. The price of milk has increased from $2.00 to $2.20, causes quantity to decrease from 10 gallons to 8 gallons. Compute the price elasticity of demand. (Use the percentage formula.)2. (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.2. (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 LUCK
- (4) Suppose the price elasticity of demand for a good is -0.2. If there is a 5% increase in the price of the good, by what percentage will the demand for the good go down?4)(20 pts.) a. Define price elasticity of demand. b. At a price of $7, the quantity demanded for ice cream is 8. When price falls to $4, the quantity demanded increases to 10. Calculate the price elasticity of demand for ice cream and give this value economic meaning c. If Starbuck's knows that the demand for their coffee is elastic, should they raise or lower price in order to increase total revenue? Explain.Compute Price elasticity, Income and Cross Elasticity. ( Show complete solution) 1. Suppose that the quantity of root beer demanded declines from 103,000 gallons per week to 97,000 gallons per week as a consequence of a 12 percent increase in the price of root beer from $27. The price elasticity of demand is 2. When demand for a product goes from 100 to 200 and income goes up from $40,000 to $45,000 what is the income elasticity of demand? 3. The price of Good X increase from P100 to P150, the quantity demanded for Good Y decreased from 50 to 35.
- (Determinants of Price Elasticity) Why is the price elasticity of demand for Coca-Cola greater than the price elasticity of demand for soft drinks generally?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?1. When the price of butter increases from $1 to $2, the quantity demand of margarine increases from 6 to 8. What is the cross-price elasticity of demand? A) (6-8)/8 (1-2)/2 (8-6)/6 (2-1)/₁ (1-2)/2 (8-6)/ B) D) (2-1)/₁ (6-8)/8
- 5. Law of Demand Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston: Price Quantity Demanded by Business Travelers Quantity Demanded by Vacationers (Dollars) (Tickets) (Tickets) 150 2,100 1,000 200 2,000 800 250 1,900 600 300 1,800 400 As the price of tickets rises from $150 to $200, the price elasticity of demand for business travelers is and the price elasticity of demand for vacationers is , using the midpoint method. Therefore, the demand for airline tickets in this price range is v elastic for vacationers because business travelers are v sensitive to changes in price.5. Law of Demand Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston: Price Quantity Demanded by Business Travelers Quantity Demanded by Vacationers (Dollars) (Tickets) (Tickets) 150 2,100 1,000 200 2,000 800 250 1,900 600 300 1,800 400 As the price of tickets rises from $250 to $300, the price elasticity of demand for business travelers is and the price elasticity of demand for vacationers is ▼ , using the midpoint method. Therefore, the demand for airline tickets in this price range is elastic for vacationers because business travelers are sensitive to changes in price.2. Suppose that business travelers and tourists have the following demand for airline tickets from Lahore to Karachi. price Quantity demanded (business travelers) Quantity demanded (tourists) $150 2100 1000 200 2000 800 250 1900 600 300 1800 400 As the price of ticket rises from $200 to $300, what is the price elasticity of demand for Business travelers (ii) Vacationers (Use the midpoint method in your calculations.) (20)