Econ hw 3

Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples illustrate the importance of

a necessity versus a luxury in determining the price elasticity of demand.

If the demand for bananas is elastic, then an increase in the price of bananas will

decrease TR of banana sellers

Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. The change in equlibrium quantity will be

greater in the beef markets than the milk markets

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

inelastic

price elasticity of demand = |-1.5| and price decreases by 10 percent, then

quantity demanded will increase by 15 percent

The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, she should

raise the price of the cinnamon rolls

If quinoa farmers know that the demand for quinoa is inelastic, in order to increase their total revenues they should

reduce the number of acres that they plant to decrease their output

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. Your roommate still enjoys Ramen noodles very much and buys even more, but you plan to buy fewer Ramen noodles in favor of foods you prefer more. When looking at income elasticity of demand for Ramen noodles, yours would

yours would be negative and your roommates would be positive