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- If the quantity demanded of widgets drops by 10% in response to a 20% decrease in the price of gadgets: a. Widgets and gadgets are complements, with a cross-price elasticity of demand of -2. b. Widgets and gadgets are substitutes, with a cross-price elasticity of demand of 10. c. Widgets and gadgets are substitutes, with a cross-price elasticity of demand of 2. d. Widgets and gadgets are substitutes, with a cross-price elasticity of demand of 0.5. e. Widgets and gadgets are complements, with a cross-price elasticity of demand of -0.5.3. The demand for good E is given by:dQe= 5,000 - 0.2Pe + 0.4Pf - 0.1M + 0.1Ae (where A = Advertising)Income is $50,000 and the price of good F is $4,000.a. Indicate whether goods E and F are substitutes or complements.b. Is E a normal or inferior good?c. If Pe = $6,000, what advertising expenditure will stimulate sales of 10,000 units of E?c. When the price of rice falls from $100 to $80, the quantity demanded of rice increases from 10 to 25, the quantity demanded of potatoes decreases from 20 to 15, and the quantity demanded of chicken increases from 18 to 35.i. Calculate the cross elasticity of demand for potatoes with respect to rice.ii. Calculate the cross elasticity of demand for chicken with respect to rice.iii. Of what use are these two cross elasticities of demand to the owner of abusiness that sells potatoes and chicken?
- c. What is a “complementary good”? Give an example. Does it have a positive or negative cross-elasticity of demand? Assume that the price cross elasticity of demand for muffins with respect to the price of coffee is (negative) - 0.7.Suppose the own price elasticity of demand for good X is -2, its income elasticity is -1, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Yis -3. Determine how much the consumption of this good will change if: Instructions: Enter your responses as percentages. Include a minus (-) sign for all negative answers. a. The price of good X decreases by 4 percent. percent b. The price of good Yincreases by 10 percent. percent c. Advertising decreases by 3 percent. percent d. Income increases by 2 percent. percent20. Which of the following statement is correct? Explain A. The greater the number of substitutes, the greater is the own price elasticity of demand B. The higher the value of the cross price elasticity of demand, the more related are the goods under consideration C. A commodity can be considered as inferior by some consumers, but it can be considered as a normal good by other consumers D. All are correct
- 10. The price elasticity of demand for any good must be less than or equal to zero unless a. the good is a necessity. b. the good is a Giffen good. c. the good is a substitute. d. the good is a luxury. 11 To the lar MacBook Air 20 F3 O00 F4 F2 F5 F6 F7 F8 $ & 4. 6. 7 8 W R Y S F H. C V M B E. %#31. Using an example of your own, distinguish between shifts of demand and movements along a demand curve. 2.The following is a demand schedule for burgers for an individual. Plot the demand schedule. PRICE OF BURGERSQUANTITY DEMANDED5.0004.5014.0023.5033.0042.5052.0061.5071.0080.509 3. Consider the demand for burgers. If the price of a substitute good (for example, pizza) increases and the price of a complement good (for example, burger buns) increases, can you tell for sure what will happen to the demand for burgers? Why or why not? Illustrate your answer with a graph.Refer to the diagram. Between prices of $5.70 and $6.30: A. D1 is more elastic than D2 B. D2 is an inferior good and D1 is a normal good. C. D1 and D2 have identical elasticities. D. D2 is more elastic than D1
- 1. If a 20% decrease in the price of long distance phone calls leads to a 35% increase in the quantity of calls demanded, we can conclude that the demand for phone calls is: a. elastic. b. inelastic. c. unit elastic. d. stretchy elastic. 2. Which of the following pairs are examples of substitutes? a. Popcorn & Pepsi b. Automobiles & Bicycles c. Boats & Fishing Tackle d. Wine & Cheese 3. When we say that a price in a competitive market is “too high to clear the market” we usually mean that (given upward-sloping supply curves). a. no producer can cover the costs of production at that price b. quantity supplied exceeds quantity demanded at that price c. producers are leaving the industry d. consumers are willing to buy all the units produced at that price 4. Which of the following statements is incorrect? Assume upward-sloping supply curves. a. If the supply curve shifts left and the demand remains constant, equilibrium price will rise. b. If…The cross elasticity of demand between siopao and catsup is negative. This tells us that___. a. catsup and siopao are independent goods b. the person calculating the elasticity forgot to include an absolute value sign c. catsup and siopao are substitutes d. catsup and siopao are complementsExplain and ilustrate grpaphically the effect of: 1. An increase in income upon the demand curve of an inferior good. 2. A drop in the price of product S upon the demand for substitute product T. 3. A decline in income upon the demand curve of a normal good. 4. An increase in the price of product J upon the demand for complementary good K.