1 rndle4 Jernigan ame: 1. Raina consumes 100% more mechanical pencils when the p
ID: 1119507 • Letter: 1
Question
1 rndle4 Jernigan ame: 1. Raina consumes 100% more mechanical pencils when the price of felt-tip -, and the cross-price elasticity of de by 50%. For Raina, pencils and pens are- is A) complements; 0.5 B) substitutes:-0.5 C) complements; 2 D) substitutes; 2 2. Suppose the price of cereal rose by 25% and the quantity of milk sold decreased by 50% We know that the: A) cross-price elasticity between cereal and milk is -2. B) cross-price elasticity between cereal and milk is-0.5. C) price elasticity of demand for milk is 2. cross-price elasticity of demand between cereal and milk is 2. D) 3. When Joe's income is $100 per week, he spends $20 per week on pizza. When his income rises to $110 per week, he spends $25 per week on pizza. If the price of pizza remains constant, this information implies that for Joe: A) pizza is a normal good and a luxury. B) pizza is a normal good and a necessity C) pizza is an inferior good, since his expenditure rose by less than the increase in income. D) demand for pizza is price-elastic. 4. An attorney supplies 40 hours of work per week when her fee is $100 per hour but supplies 60 hours of work per week when her fee rises to $120 per hour. Using the midpoint formula, her elasticity of supply is equal to: B) 0.8 C) 2.2 D) 0.45Explanation / Answer
Question number 1. Because the increase in price of a related good is increasing the quantity demanded of the Other good we conclude that the two goods are substitutes. The cross price elasticity is therefore 100% divided by 50% = 2. Correct option is option d.
The correct choice for question number 2 is option A. Note that the quantity demanded of milk is decreasing by 50% while the price of cereal is increasing by 25%. This implies that the price elasticity of demand is -50% divided by 25% is equals to -2.
Correct option for question number 3 is option a. With increase in income the consumer is increasing its consumption which means the the product purchased is normal in nature. Because increased income is a spend on Pizza it is a luxury good
Question number 4. Using the midpoint formula for elasticity of demand, the elasticity is 2.2, therefore the correct option is option C.
According to the mid-point formula, the price elasticity of demand for a product is given by:
Ed = (Q2 – Q1) / [(Q2 + Q1)/2] / (P2 – P1) / [(P2 + P1)/2]
Cases Q1 Q2 P1 P2 Q2-Q1 (Q2+Q1)/2 %Q P2-P1 (P1+P2)/2 %P Ed 40.00 60.00 100.00 120.00 20.00 50.00 40.00 20.00 110.00 18.18 2.20Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.