Chapter 5 HW

Almonds are a crop that grows on trees. Farmers do not need to replant trees every year to produce a crop of almonds. It takes at least five years after planting for trees to bear fruit. Several factors such as weather, disease, and long-term projections about price impact the supply of almonds available. Barley is a grass that must be planted every year to produce a crop. The growing season is short, about three to four months. Several factors influence farmers' decisions to plant barely each year, including price, weather, and disease. Pick every factor that helps to determine the price elasticity of supply for a product (i) flexibility of inputs or resources used to make a product (ii) the ability to store product (iii) ease of firms to enter or exit the market

(i), (ii), (iii)

Blake eats two bags of generic potato chips each day. Blakes hourly wage increases from $7 to $15, and he decided to stop eating generic chips and instead eats a name-brand potato chip. Use the midpoint method to calculate Blake's income elasticity of demand for the generic potato chip. Round your answer to two decimal places.

-2.75

If the price of Product E decreasing by 2% causes its quantity demanded to increase by 14% and the quantity demanded Product F to increase by 17%, what is the cross-price elasticity of demand? Round your answerer to one decimal place

-8.5

Laurens salary decreases from $40,000 to $30,000. She decided to reduce the number of outfits she purchases each year from 20 to 19. Use the midpoint method to calculate the income elasticity of demand for new outfits. Round your answer to two decimal places.

0.18

If good C increases in price by 20% a pound, this causes the quantity demanded for good D to increase by 30%, what is the cross-price elasticity of the two goods? round your answer to one decimal place

1.5

In 2017, Hurricane Irma had a significant, negative impact on the orange harvest in the state of Florida. The US Department of Agriculture predicted that the number of oranges produced would be 21% lower than the previous year. If the price elasticity of demand for oranges is -1.5, what impact would Hurricane Irma have on the price of oranges? What was the change in the price of oranges?

14

According to the US department of energy, the average price of gasoline in the US fell by 14% in 2015. The number of hybrid electric vehicles (HEV) sold in the US fell by 36% in the same year. Calculate the cross-price elasticity of demand for HEV's and gasoline

2.6

Laurens salary decreases from $40,000 to $30,000. She decided to reduce the number of outfits she purchases each year from 20 to 19. This good is ... (a) a normal good and income inelastic (b) a normal good and income elastic (c) an inferior good

A

You may have observed that items such as different brands of aspirin, tomato sauce, or gasoline are typically priced the same as each other. This is particularly true when consumers can find these goods in close proximity to each other. For example, prices are often the same at gas stations that are on opposite sides of the street. Prices are also generally the same for products next to each other on the grocery store shelf. The aforementioned examples are goods that are likely to be ________. You would expect the value of the cross-price of elasticity to be _______, because the opportunity cost of getting information on price is low

Substitutes and Large

If good C increases in price by 20% a pound, this causes the quantity demanded for good D to increase by 30%, what is the relationship between the two goods? (a) substitutes (b) no relationship (c) compliments

a

The price of milk at the local grocery store is cut by 15%. In response to the price cut, the quantity of milk demanded falls by 5%. The absolute value of the price elasticity of demand for milk is ________ and the price elasticity of demand is _______ (a) 0.33; inelastic (b) 3; elastic (c) 3; inelastic (d) 0.33; elastic

a

With fewer substitutes, demand tends to be (a) less elastic (b) more elastic (c) perfectly inelastic

a

You are pricing manager at a generic pharmaceutical distributor. The CEO of the company calls a meeting of all the managers and states that it is critical to increase revenue soon or you may have to start laying off employees. You know the price elasticity of demand for your leading generic drug is 1.5 and you sell it for three times what it costs. As pricing manager you should (a) suggest decreasing the price on the leading generic drug to increase revenue (b) argue that the numbers must be off because the company is charging three times the cost of the leading generic drug and therefore is making a profit (c) suggest laying off employees because elasticity of the leading generic drug is unit elastic, so there is no way to increase revenue by changing price (d) suggest increasing the price on the leading generic drug to increase revenue

a

Classify which of the choices below are substitutes (can be more than one) (a) shoes and sandals (b) beef and chicken (c) peanut butter and lumber (d) wine and cheese (e) tables and chairs (f) shampoo and conditioner

a and b

Demand for a luxury item tends to be (a) less elastic (b) more elastic (c) perfectly inelastic

b

Demand for an item that uses a large portion of your budget tends to be (a) less elastic (b) more elastic (c) perfectly inelastic

b

If the price of Product E decreasing by 2% causes its quantity demanded to increase by 14% and the quantity demanded Product F to increase by 17%, what is the relationship between the two goods? (a) no relationship (b) compliments (c) substitutes

b

Which statement is the best definition of price of elasticity of demand? (a) the ration of the percent change in demand to the percent change in income (b) The ratio if the percent change in quantity demanded to the percent change in price (c) the ratio of percent change in price to the percent change in the quantity demanded (d) the absolute value of the slope of the demand curve

b

over long periods of time demand tends to be (a) less elastic (b) more elastic (c) perfectly inelastic

b

Blake eats two bags of generic potato chips each day. Blakes hourly wage increases from $7 to $15, and he decided to stop eating generic chips and instead eats a name-brand potato chip. What is the relationship between the two goods? (a) a normal good and income inelastic (b) a normal good and income elastic (c) an inferior good

c

Classify which of the choices below are independent (can be more than one) (a) shoes and sandals (b) beef and chicken (c) peanut butter and lumber (d) wine and cheese (e) tables and chairs (f) shampoo and conditioner

c

Jonathan's income falls by 15%. He decided to cut down his purchases of high end restraunt meals by 20%. His income elasticity of demand for high end restraunt meals is (a) 0.75 (b) -1.33 (c) 1.33 (d) -0.75

c

If the price of a good falls and this causes the quantity demanded of another good to increase, then the items are considered to be ________ and the cross-price elasticity is _______

compliments and negative

Almonds are a crop that grows on trees. Farmers do not need to replant trees every year to produce a crop of almonds. It takes at least five years after planting for trees to bear fruit. Several factors such as weather, disease, and long-term projections about price impact the supply of almonds available. Barley is a grass that must be planted every year to produce a crop. The growing season is short, about three to four months. Several factors influence farmers' decisions to plant barely each year, including price, weather, and disease. Based on this information... (a) barley had a more inelastic supply in the short run because barley is more dependednt on price in the short run (b) it is impossible to infer anything about the price elasticity of supply for these two crops (c) the crops have the same price elasticity of supply because they are both agricultural commodities (d) almond have a more inelastic supply in the short run because little can be done to change production in the short run

d

An article in Forbes notes that the Intercounty Connector toll road that connects two counties in Maryland was not generation ad much toll revenu as predicted. At this time, the toll rate was $8 for a passanger car making a round trip form end to end on the tollway duriung rush hour. What additional information would you need to know in order to determine if teh toll shoudl be increased or decreased? (a) the income elasticity of drivers using the tollway (b) the number of vehicles using the tollway per day (c) the price elasticity of supply (d) the price elasticity of demand

d

An article in Forbes notes that the Intercounty Connector toll road that connects two counties in Maryland was not generation ad much toll revenue as predicted. At this time, the toll rate was $8 for a passenger car making a round trip from end to end on the tollway during rush hour. What additional information would you need to know in order to determine if the toll should be increased or decreased? (a) the income elasticity of drivers using the tollway (b) the number of vehicles using the tollway per day (c) the price elasticity of supply (d) the price elasticity of demand

d

Classify which of the choices below are compliments (can be more than one) (a) shoes and sandals (b) beef and chicken (c) peanut butter and lumber (d) wine and cheese (e) tables and chairs (f) shampoo and conditioner

d, e, and f

If the price of a good falls and this causes the quantity demanded of another good to fall, then the items are considered to be _________ and the cross-price elasticity is _________

substitutes and positive