ECON 110 Connect Homework 2 Supply and Demand Consumer Demand Assignment solutions complete answers

ECON 110 Connect Homework 2 Supply and Demand Consumer Demand Assignment solutions complete answers 

 

Question 1

Rents Rising in Hurricane's Wake

Houston. Hurricane Harvey wiped out a massive chunk of the Houston-area housing stock. FEMA estimates that 203,000 homes were damaged and 12,700 destroyed. Somewhere between 15,000 and 20,000 apartment units suffered a similar fate. That damage created a severe imbalance in the housing market: more people seeking new housing and fewer units available. Local realtors say this imbalance has pushed apartment rents up by 15–20 percent.

 

Based on the News Wire,

a. what is the initial (pre-hurricane) equilibrium rent per month? 

b. how large is the pre-hurricane shortage? 

c. what is the post-hurricane equilibrium rent? 

d. what is the pre-hurricane quantity? 

e. what is the post-hurricane quantity? 

f. how large is the post-hurricane shortage at the pre-hurricane equilibrium rent? 

 

Question 2

Scalpers Profiting Greatly from Pope's Visit

New York. Pope Francis' visit to New York City was a blessed event. It was also a blessed opportunity for ticket scalpers. 93,000 New Yorkers applied for tickets to watch the Pope's procession through Central Park. But church officials had only 40,000 tickets to distribute, which they did by lottery—for free. That left 53,000 New Yorkers without tickets. It was a scalper's heaven. Sinful resellers immediately started hawking tickets online. The free tickets were simply mailed in a PDF to lottery winners, with no ID required, making them easy to resell. Scalped tickets sold for as much as $3,000 a pair. Although Church officials urged scalpers to repent, the opportunity for profit was irresistible.

 

According to the News Wire,

a. How large was the market shortage at the Church-set price of $0?

b. If the Church had sold the tickets for $100, how would have quantity demanded changed?

Quantity demanded would have likely

c. If the Church sold the tickets for $100, would the market shortage have been larger or smaller?

The market shortage would have likely been

d. If the Church sold the tickets for the equilibrium price, would a market shortage exist?

 

Question 3

If a product becomes more popular,

a. Which curve will shift? 

b. Along which curve will price and quantity move? 

c. At the new equilibrium, will price be higher or lower? 

d. At the new equilibrium, will quantity be higher or lower? 

 

Question 4

Campus Drinking and Alcohol Prices

Campus drinking is a common problem. And with that drinking comes a slew of a problems, including traffic accidents, sexual assault, property crimes, and sexually transmitted diseases. One way to curb camps drinking is to increase the price of beer, wine, and booze. When the price of alcohol goes up, college students drink less. That's the conclusion from a Harvard survey of 22,831 students at 158 colleges. Students faced with a $1 increase above the average drink price of $2.17 will be 33 percent less likely to drink at all or as much. Dozens of other studies have confirmed that higher alcohol prices (e.g., via excise taxes) really do reduce campus drinking and its antisocial effects.

a. According to the News Wire, what would be the response of students to a tax on alcohol that raises the price of alcoholic drinks by $1?

Students will drink 

b. Graph the response of students to higher alcohol prices.

 

Question 5

If the equilibrium price for tickets to a Taylor Swift concert is $100 each and she sells them for $80,

a. Does she create a market surplus or shortage? 

b. Suppose scalpers buy 10,000 tickets and resell them for $100 each. How much profit do the scalpers earn? 

 

Question 6

According to the elasticity computation for popcorn of 0.2, by how much would popcorn sales fall if the price increased by: 

 

Question 7

 

a. By how much would coffee sales decline if the price of coffee increased 10 percent?

b. If your local coffee shop raised its coffee prices by the same amount (10 percent), would sales decline by more, less, or the same amount as calculated in part a?

 

Question 8

A Starbucks Java Jolt Just Got More Expensive

Starbucks announced today that it is increasing the price of its brewed coffee by 10-20 cents a cup, or about 9 percent. A "tall” cup of java will now cost $1.95 to $2.15 in Starbucks' 8,000 U.S. locations. The company said the price increase was justified by rising costs, including rent and labor.

Analysts predicted that the price hike wouldn't deter most consumers, as company loyalty is extremely high. Whatever sales might be lost for price-sensitive customers would be more than offset by higher revenues from loyal customers. The company's stock rose after the announcement.

According to the News Wire,

a. By what percent did Starbucks raise brewed coffee prices? 

b. If unit sales didn't decline at all, what would the price elasticity of demand have been? Now suppose unit sales fell by 2 percent after this price increase. 

c. Calculate price elasticity of demand. 

Instructions: Enter your response using absolute value. 

d. In the case presented in part c, demand was 

e. In the case presented in part c, total revenue would have

 

Question 9

Refer to the News Wire to answer one question.

Apple Slashes the Price of iPhone 8

Apple cut the price of the iPhone 8 by 15 percent, to $599. The price cut is intended to boost sales for the last year's phone as a cheaper alternative to the new and more expensive iPhone XS and XS max models that were launched this week. The cheapest XS is price at $999. Apple expects unit sales of the cheaper iPhone to increase by 20 percent this quarter, in response to the lower price.

According to the News Wire,

The price elasticity of demand for the iPhone 8 is 

 

Question 10

   

Price Elasticity of Demand, Midpoint Formula: 

E = percentage change in quantity demanded ÷ percentage change in price, in absolute value

where,

percentage change in quantity demanded = (Q2 − Q1) ÷ [(Q1 + Q2) ÷ 2]

percentage change in price = (P2 − P1) ÷ [(P1 + P2) ÷ 2]

Note that the denominator in each part uses the average quantity or the average price.

 

Economists estimate price elasticities more precisely by using average price and quantity to compute percentage changes. The formula above describes this method.

Using the table, graph, and formula, compute E for a popcorn price increase from 15 cents to 25 cents per ounce.