ECON 213 Problem Set 4 Elasticity Assignment solutions complete answers

ECON 213 Problem Set 4 Elasticity Assignment solutions complete answers 

 

Let's say you get a 10% raise. As a result, you decide to buy half as much Boone's farm wine as before and buy more Rodney Strong cabernet.

For you, Boone's farm wine is a(n)  good, and Rodney Strong cabernet is a(n)  good.

 

Suppose a subway line  determines it can charge different prices to riders during rush hour and riders who travel on the weekend or during off-peak hours. The subway line’s goal is to increase total revenue.

The price elasticity of demand for riders during rush hour is -0.70, and the price elasticity of demand for off-peak travelers is -1.80. 

Based on the price elasticity of demand for each group of people, how should the subway line adjust its prices?

 

Under which conditions is price elasticity of supply relatively elastic or relatively inelastic? Place each item in the correct column.

 

The table below shows the demand schedule for a pint of Sweet Chocolate, a delicious peanut butter chocolate stout:
 

Price                  
Quantity Demanded
$8
3
$6
5

One of the problems with the basic elasticity formula is that you get different elasticity values depending on whether you assume the price falls from $8 to $6, or whether you assume the price rises from $6 to $8. The question below illustrates how the midpoint formula corrects for this problem. Give all answers to two decimals.

 

Use the point elasticity formula to calculate the price elasticity of demand if the price of a pint falls from $8 to $6:  

Use the point elasticity formula to calculate the price elasticity of demand if the price of a pint rises from $6 to $8:  

Using the midpoint method to calculate the price elasticity of demand, the price elasticity of demand is

 

The price of peanut butter increases from $3.00  to $3.50 per jar, and the quantity of jelly demanded falls from 35 jars to 28 jars. Using the midpoint formula, calculate the cross-price elasticity of demand. Report your answer to two decimal places.

 

Consider the market for coffee. For each of the following scenarios, what would happen to total revenue after the price increases? Place each scenario in the correct category.

 

One of the more important business applications of demand elasticity is the relationship between price and total revenue. For each of the following three scenarios, specify whether demand is elastic, inelastic, or unitary elastic.

 

Your local movie theater earns a total revenue of $40,000 per month when the price of a movie ticket is $8, and it earns a total revenue of $35,000 when the price of a movie ticket is $10.

 

When your local Internet service provider increased its monthly charge from $40 to $50, the number of subscribers fell from 2,000 to 1,800.

 

Last month, your local coffee shop charged $4 for a cappuccino and sold 150 cappuccinos. This month, it increased the price of a cappuccino to $5 and is on track to sell 120 cappuccinos.

 

The figures below depict four different demand curves, which range from perfectly inelastic to perfectly elastic. Match each good with the appropriate demand curve.

 

A local pizzeria sells 500 large pepperoni pizzas per week at a price of $20 each. Suppose the owner of the pizzeria tells you that the price elasticity of demand for his pizza is -3, and he asks you for advice. He wants to know two things. First, how many pizzas will he sell if he cuts his price by 10%? Second, how will his revenue be affected?

 

If he cuts his price by 10%, his sales will increase to     pizzas, and his total revenue will increase to $   .

 

Suppose an airline  determines it can charge different prices to people traveling for business or emergencies and leisure travelers who travel for pleasure. The airline’s goal is to increase total revenue. 

 

The price elasticity of demand for business and emergency air travel is -0.40, and the price elasticity of demand for pleasure air travelers is -3.00.  

 

Based on the price elasticity of demand for each group of people, how should the airline adjust its prices?

 

For each of the following scenarios, what would happen to total revenue after a price increase? Place each scenario in the correct category.

 

Put the goods in the correct column, indicating whether the demand for them is elastic or inelastic. Think about each good in terms of the typical person's quantity demanded.

 

Let's say you get a 10% raise. As a result, you decide to buy twice as much steak as before and cut back on canned soup.

 

For you, steak is a(n)  good, and canned soup is a(n)  good.

 

The price of a large pizza decreased from $15.00 to $11.00.  As a result, the quantity demanded of skateboards increased from 260.00 to 280.00.

 

Using the midpoint formula, what is the percentage change observed for the price of a large pizza? Give your answer to two decimal places.

 

Using the midpoint formula, what is the percentage change observed for the quantity demanded of skateboards? Give your answer to two decimal places.

 

What is the cross-price elasticity of demand between pizzas and skateboards? Give your answer to two decimal places.

 

Which of the following demand curves best represent the demand for coffee as discussed in the "Coffee Cravers" article?

 

Use the drag tool to move the point along the curve to illustrate a price change from $6 to $2.

 

Using the midpoint method, calculate the price elasticity of demand associated with the price change in Part 1. 

 

At a price of $300, a cell phone company manufactures 200000 phones. At a price of $400, the company produces 400000 phones. 

 

What is the price elasticity of supply? (Round your answer to two decimal places.)

 

A private university charges the same tuition for both in-state and out-of-state students, and it notices that in-state and out-of-state students seem to respond differently to tuition changes. The quantity demanded for in-state and out-of-state students at different tuition levels is provided below.

 

As the price of tuition rises from $10000 to $15000, the price elasticity of demand for tuition for out-of-state applicants is _____ elastic than it is for in-state applicants.

 

What is the in-state elasticity and the out-of-state elasticity? Give your answer to two decimals.

 

Sort the items below into two main categories: whether demand for each type of good is relatively elastic or relatively inelastic.

 

 

Suppose that an employee at a coffee shop is willing to work 30 hours per week when she is paid $11.00 per hour.  When she is offered a raise to $15.00 per hour, she is willing to work 40 hours per week.  

 

At a price of $250, a cell phone company manufactures 150000 phones. At a price of $350, the company produces 350000 phones.

 

As the price of tuition rises from $15000 to $20000, the price elasticity of demand for tuition for out-of-state applicants is _____ elastic than it is for in-state applicants.

 

As the price of tuition rises from $10000 to $15000, the price elasticity of demand for tuition for out-of-state applicants is _____ elastic than it is for in-state applicants.

 

The price of a large pizza decreased from $22.00 to $18.00.  As a result, the quantity demanded of skateboards increased from 270.00 to 290.00.

 

The price elasticity of demand for weekend and evening patrons is -0.60, and the price elasticity of demand for matinee moviegoers is -2.50. 



Suppose that an employee at a coffee shop is willing to work 30 hours per week when she is paid $10.00 per hour.  When she is offered a raise to $15.00 per hour, she is willing to work 40 hours per week.  

 

Her price elasticity of supply is     .  (Note: use the midpoint method and give your answer to two decimal places.)

 

At a price of $300, a cell phone company manufactures 150000 phones. At a price of $400, the company produces 350000 phones.

 

What is the price elasticity of supply? (Round your answer to two decimal places.)

 

The price of a large pizza decreased from $16.00 to $12.00.  As a result, the quantity demanded of skateboards increased from 290.00 to 310.00.

 

The price of a large pizza decreased from $16.00 to $12.00.  As a result, the quantity demanded of skateboards increased from 290.00 to 310.00.

 

Using the midpoint formula, what is the percentage change observed for the price of a large pizza? Give your answer to two decimal places.

 

Using the midpoint formula, what is the percentage change observed for the quantity demanded of skateboards? Give your answer to two decimal places.

 

What is the cross-price elasticity of demand between pizzas and skateboards? Give your answer to two decimal places.

 

Let's say you get a 10% raise. As a result, you decide to buy twice as much Kendall Jackson merlot as before and cut back on Carlo Rossi jug wine.

 

For you, Kendall Jackson merlot is a(n)  good, and Carlo Rossi jug wine is a(n)  good.

 

The price elasticity of demand for weekend and evening patrons is -0.70, and the price elasticity of demand for matinee moviegoers is -2.70. 

 

One of the more important business applications of demand elasticity is the relationship between price and total revenue. For each of the following three scenarios, specify whether demand is elastic, inelastic, or unitary elastic. 

Your local movie theater earns a total revenue of $40,000 per month when the price of a movie ticket is $8, and it earns a total revenue of $35,000 when the price of a movie ticket is $10.

When your local Internet service provider increased its monthly charge from $40 to $50, the number of subscribers fell from 2,000 to 1,800.

Last month, your local coffee shop charged $4 for a cappuccino and sold 150 cappuccinos. This month, it increased the price of a cappuccino to $5 and is on track to sell 120 cappuccinos.

 

The figures below depict four different demand curves, which range from perfectly inelastic to perfectly elastic. Match each good with the appropriate demand curve.

 

A local pizzeria sells 500 large pepperoni pizzas per week at a price of $20 each. Suppose the owner of the pizzeria tells you that the price elasticity of demand for his pizza is -2, and he asks you for advice. He wants to know two things. First, how many pizzas will he sell if he cuts his price by 10%? Second, how will his revenue be affected?

If he cuts his price by 10%, his sales will increase to      pizzas, and his total revenue will increase to $    .

 

Suppose a subway line determines it can charge different prices to riders during rush hour and riders who travel on the weekend or during off-peak hours. The subway line’s goal is to increase total revenue. The price elasticity of demand for riders during rush hour is -0.60, and the price elasticity of demand for off-peak travelers is -2.70. Based on the price elasticity of demand for each group of people, how should the subway line adjust its prices? Choose one: A. Lower the price for off-peak travelers, and keep the price the same for riders during rush hour. B. Lower the price for off-peak travelers, and raise the price for riders during rush hour. C. Raise the price for off-peak travelers, and keep the price the same for riders during rush hour. D. Raise the price for off-peak travelers, and lower the price for riders during rush hour.

 

Please read the article below and use the information in the article to answer this question. For each of the following scenarios, what would happen to total revenue after a price increase? Place each scenario in the correct category.

 

Put the goods in the correct column, indicating whether the demand for them is elastic or inelastic. Think about each good in terms of the average person's quantity demanded.

 

Let's say you get a 10% raise. As a result, you decide to buy twice as much Jameson Irish whiskey as before and cut back on rotgut whiskey.

For you, Jameson Irish whiskey is a(n)     good, and rotgut whiskey is a(n)     good.

 

The price of a large pizza decreased from $16.00 to $12.00.  As a result, the quantity demanded of skateboards increased from 260.00 to 280.00.

Using the midpoint formula, what is the percentage change observed for the price of a large pizza? Give your answer to two decimal places.

Using the midpoint formula, what is the percentage change observed for the quantity demanded of skateboards? Give your answer to two decimal places.

What is the cross-price elasticity of demand between pizzas and skateboards? Give your answer to two decimal places.

 

Which of the following demand curves best represent the demand for coffee as discussed in the "Coffee Cravers" article?

 

Use the drag tool to move the point along the curve to illustrate a price change from $6 to $2.

 

Using the midpoint method, calculate the price elasticity of demand associated with the price change in Part 1. Give an answer that is correct to two decimal places.

 

At a price of $200, a cell phone company manufactures 100000 phones. At a price of $300, the company produces 300000 phones. What is the price elasticity of supply? (Round your answer to two decimal places.)

 

A private university charges the same tuition for both in-state and out-of-state students, and it notices that in-state and out-of-state students seem to respond differently to tuition changes. The quantity demanded for in-state and out-of-state students at different tuition levels is provided below.

As the price of tuition rises from $20000 to $30000, the price elasticity of demand for tuition for out-of-state applicants is _____ elastic than it is for in-state applicants.

 

What is the in-state elasticity and the out-of-state elasticity? Give your answer to two decimals.

 

Suppose that an employee at a coffee shop is willing to work 30 hours per week when she is paid $13.00 per hour. When she is offered a raise to $14.00 per hour, she is willing to work 40 hours per week. Her price elasticity of supply is    . (Note: use the midpoint method and give your answer to two decimal places.)

 

Sort the items below into two main categories: whether demand for each type of good is relatively elastic or relatively inelastic.

 

A local pizzeria sells 500 large pepperoni pizzas per week at a price of $20 each. Suppose the owner of the pizzeria tells you that the price elasticity of demand for his pizza is -4, and he asks you for advice. He wants to know two things. First, how many pizzas will he sell if he cuts his price by 10%? Second, how will his revenue be affected?

 

The price elasticity of demand for weekend and evening patrons is -0.70, and the price elasticity of demand for matinee moviegoers is -1.70. Based on the price elasticity of demand for each group of people, how should the movie theater adjust its prices?

 

Let's say you get a 10% raise. As a result, you decide to buy half as much Steak-Ums as before and buy more hamburger.

For you, Steak-Ums is a(n)     good, and hamburger is a(n)    good.

 

The price of a large pizza decreased from $21.00 to $17.00.  As a result, the quantity demanded of skateboards increased from 240.00 to 260.00.

Using the midpoint formula, what is the percentage change observed for the price of a large pizza? Give your answer to two decimal places.

Using the midpoint formula, what is the percentage change observed for the quantity demanded of skateboards? Give your answer to two decimal places.

What is the cross-price elasticity of demand between pizzas and skateboards? Give your answer to two decimal places.