) If A and B are substitute goods, a decrease in the price of good A would: A) h
ID: 1114525 • Letter: #
Question
) If A and B are substitute goods, a decrease in the price of good A would: A) have no effect on the quantity demanded of B. (B) lead to an increase in demand for B. (C) lead to a decrease in demand for B. (D) none of the statements associated with this question are correcet. a market characterized by the following inverse demand and supply functions Pr = 10-2Qx and P x = 2 +2Qx. An $8 per unit price floor will result in a (A) shortage of 1 unit. (B) surplus of 2 units. (C) shortage of 3 units. (D) surplus of 3 units. (k) Suppose market demand and supply are given by (r = 300-4P and Qs-_50+ 3P. The equilibrium price is: (A) $35. (B) $40. (C) $50. (D) $60. (1) The own price elasticity of demand for apples is -1.2. If the price of apples falls by 5 percent, what will happen to the quantity of apples demanded? (A) It will increase 5 percent. (B) It will fall 4.3 percent. (C) It will increase 4.2 percent. (D) It will increase 6 percent. (m) If apples have an own price elasticity of -1.2 we know the demand is: (A) unitary (B) indeterminate (C) elastic. (D) inelastio. (n) We would expect the demand for jeans to be: (A) more elastic than the demand for clothing (B) less elastic than the demand for clothing. (C) the same as the demand for clothing. (D) neither more elastic, less elastic, nor the same elasticity as that of the demand for clothingExplanation / Answer
(j) (B)
When P = $8,
From inverse demand function: 8 = 10 - 2Qd, or 2Qd = 2, or Qd = 1
From inverse supply function: 8 = 2 + 2Qs, or 2Qs = 6, or Qs = 3
Since Qs > Qd, there is a surplus equal to (Qs - Qd) = 3 - 1 = 2 units.
(k) (C)
In equilibrium, Qd = Qs
300 - 4P = - 50 + 3P
7P = 350
P = $50
(l) (D)
Elasticity = % Change in quantity demanded / % Change in price
- 1.2 = % Change in quantity demanded /(- 5%)
% Change in quantity demanded = (- 1.2) x (- 5%) = 6% (Increase)
(m) (C)
Since absolute value of elasticity is higher than 1, demand is elastic.
(n) (A)
The broader (narrower) the product definition, the less (more) elastic demand is.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.