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- If demand is elastic, will shifts in supply have a larger effect on equilibrium quantity or on price?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?Explain why using the midpoint formula for calculating the elasticity of demand gives the same result whether price increases or decreases, but using the initial price and quantity instead of the average does not.
- Why is the demand curve with constant unitary elasticity concave?PRICE (Dollars per unit) 20 18 16 14 12 10 60 4 2 0 H M W N +Y + + Z 10 12 14 8 QUANTITY (Units) 16 → 20 sing the graph, complete the table that follows by indicating whether each statement is true or false. Statement Curve OO is more elastic between points V and Y than curve LL is between points V and X. Between points V and Z, curve MM is perfectly elastic. Between points V and Y, curve OO is inelastic. True O O False O O OIn the coffee market, you notice that when the price of a kilo of coffeechanged from $28 to $16 the quantity of coffee supplied changed from 65to 40 kilos, all else held constant. What is (own) price elasticity of supplyfor coffee?
- The supply of wigits is pefectly elastic and the demand for wigits has a price elasticity of 2 and an income elasticity of 1 (a) If income increases by 25 percent then the equilibrium quantity will_____(increase, decrease, not change) by_____percent and the equilibrium price will ____ (increase, decrease, not change) (b) If a 25 percent tax is imposed on wigits then the quantity consumed will_____(increase, decrease, not change) by____percent and the equilibrium price, inclusive of the tax, will increase by____ percent.Which of the following statements is correct? For this question one or more statements may be correct. If the statement you selected is not correct, you will lose points. During our discussion about hte history of U.S. farm policy, we mentioned that USDA was established in the "third period" O The term "gasohol" was introduced with the 2007 energy independence act Price elasticity of demand is not influenced by the units of measurement used for price or quantity demanded O The most recent farm bill has 14 titles In general elasticity can measure whether a price increase causes quantity demanded to increase decrease If we know the elasticity of demand, we can tell producers what will happen to profit when they change priceConsider public policy aimed at smoking. a. Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently costs $2 and the government wants to reduce smoking by 20 percent, by how much should it increase the price? b. 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? c. Studies also find that teenagers have a higher price elasticity than do adults. Why might this be true?
- 4A. Construct a labor market with perfectly inelastic demand that is kinked at wage w*. 4B. Construct a labor market with perfectly inelastic supply that is kinked at wage w*. 4C. Construct a labor market with perfectly elastic supply that is double-kinked at wage w*. Answer all otherwise dounvoteUntil recently, Cynthia's Cycles rented bicycles for $8 and they rented 320 bicycles per month. They just raised the price to $12 and as a result, they only rent 280 tickets week. Is the demand for the bycicle rentals elastic, inelastic, or unitary elastic? Did the toal revenue increase, decrease, or stay the same with the change in price?Suppose that the price of cotton has increased from AED 100 per kilo to AED 150 per kilo. Suppose that the quantity demanded of this cotton was 450,000 tons in the market of cotton and after changing the prices of cotton this quantity is changed to 200,000 tons. 1- Calculate the PED (price elasticity of demand) ( 2- Is the demand in this market elastic or not? And why? 3- To increase the revenue of the seller, is it better to increase the price or decrease it? and why?
