Question 1 Figure 4-9 Panel (a) P₁ P price ↑ 8 T quantity Panel (b) an increase in the price of cigarettes O placing a tax on cigarettes ↑price D' Refer to Figure 4-9. The graphs show the demand for cigarettes. In Panel (b), the arrows are consistent with which of the following events? the prohibition of cigarette advertisements on television quantity O decreasing the price of marijuana, given that tobacco and marijuana are complements
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- 9. Application: Elasticity and hotel rooms The Inlinwing graph input tool shows the daily demand for hotel moms at the Oceans Hotel and Casino in Atlantic City, New Jersey. To help the hotel management better understand the market, an woonomist identified three primary factors that affect the demand for me ach night. The demand factum, lung with the values corresponding to the initial demand curve, are shown in the following table and alungside the graph input tool. Demand Factor Average American household income Roundtrip airfare from New Orleans (MSY) to Atlantic City (ACY) Room ratu at the Meadows Hotel and Casino, which is near the Ocean Use the graph input tool to help you answer the following questions. You wil not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Show Transcribed Text 600 450 ****** 100 0 Demand ++ 55155 366 350 351 350 100 ans…The graph below shows the demand for electricity in England during typical days in winter and summer. The pie chart shows how electricity is used in an average English home. Summarise the information by selecting and reporting the main features and make comparisons where relevant. Figure 1 Typical Daily Demand of Electricity 50000 40000 30000 Winter Summer 20000 10000 o hrs 3 6. 12 15 18 21 24 Different hours of a day Figure 2 What the electricity is used for I Heating room, Heating 15% water 15% 1Ovens, Kett les, Washing 52% Machines 18% ILighting, TV, Radio Vacuum cle ane rs, Food m ixers, Electric too ls Units of EectricityWhen the price of mustard oil increased from 70 taka per litre to 90 taka per litre thequantity demanded in the market fell from 47,000 litres to 40,000 litres. Using the pointelasticity method, calculate the price elasticity of demand of mustard oil. What type ofdemand does mustard oil have?
- a) List FOUR main determinants of Income elasticity of demandb) The following relate to a consumer in a certain market:Income (Ksh) Price of X (Ksh) Demand for X Demand for Y5,000 15 30 1006,000 21 35 1208,000 30 40 150Required:Calculate the cross elasticity of demand as the price of X changes from Ksh. 15 to Ksh21 and interpret.QUESTION TWOIvy, a General Manager at Mumias Sugar Company, estimated a multiplicative demandfunction of the form: ?? = ???? ??1?0?0 using a cross-section data collected in thecompany sales on 30th June, 2016. The estimation results are as follows:Constant Price (P) Income (I) Price of Other Good (P0)Estimated coefficient 0.022 -0.223 1.354 0.133Standard Error 0.012 0.056 0.502 0.814t-statistic (1.19) (-3.98) -2.69 -0.13Number of Observations, n = 210; R-squared = 0.7516Critical Students' t = 1.96 at 5% Level of Significance2a) How would the coefficients and ?2 value be interpreted?b) What will the quantity demanded be if the values of the independent variables…ven the following linear functions describing the supply and demand for widgets: na, using the algebraic methods explained in the lesson, the equilibrium price ) Cony substituting the equilibrium price into the original functions, calculate the equilibrium quantity rconirm your results by completing a supply and demand schedule and by graphing the supply and demand curves, being sure to mark in the equilibrium price and quantity on the axes. Qs = -4 + 2P Qd = 24 - 2P a) Equiibrium price : as- Qd Qs =-4+2x7=10 Qd - 24-14= 10 %3D -4+ap= 24-2P -4P=-28 P=7 Qs = -4 + 2P lo Price ($) Qd 24 - 2P 8. 10 10 2. Equaibrium at (7,10) 123456189 10 PriceWhatisthedifferencebetweenthedemandandthe quantity demanded of a product, say milk? Explain in words and show the difference on a graph with a demand curve for milk.
- The following graph shows the demand for a good. PRICE (Dollars per unit) 350 225 175 50 0 Region Between W and X Between Y and Z Between X and Y Z O True X For each of the regions listed in the following table, use the midpoint method to identify if the demand for this good is elastic, (approximately) unit elastic, or inelastic. O False | || I " 14 18 QUANTITY (Units) 28 W Demand True or False: The slope of the demand curve is equal the value of the price elasticity of demand. Elastic Inelastic Unit Elasticent Course ons @ 2 W 3 e d For each of the following pairs of goods, select which is likely to have more INELASTIC demand. In the next question you will explain your answer (for one of them), but for now select which is more likely to be more inelastic. (a) Gasoline OR Strawberry Car Air Freshener [Select] (b) Peanut Butter M&M's at 7-11 OR All Candy at 7-11 [Select] (c) The only tailor in a small city OR One of 15 dry cleaners in the same city [Select] C $ 4 % 5 t 5.0 g Oll 6 O b y h & N 7 U n 8 O i E ( 9 k ✓ OThe following graph shows the demand for a good. PRICE (Dollars per unit) 280 180 140 40- 0 12 Region Between X and Y Between W and X Between Y and Z Z O True O False 42 54 QUANTITY (Units) For each of the regions listed in the following table, use the midpoint method to identify if the demand for this good is elastic, (approximately) unit elastic, or inelastic. 84 W O O Demand Elastic Inelastic Unit Elastic O O O O O O O (?) True or False: The slope of the demand curve is not equal to the value of the price elasticity of demand.
- Creative Homework/Short Project Assume that you arean entrepreneur who runs a bakery that sells glutenfree breads and cakes. You believe that the currenteconomic conditions merit an increase in the price ofyour baked goods. You are concerned, however, thatincreasing the price might not be profitable becauseyou are unsure of the price elasticity of demand for yourproducts. Develop a plan for the measurement of priceelasticity of demand for your products. What findingswould lead you to increase the price? What findingswould cause you to rethink the decision to increaseprices? Develop a presentation for your class outlining(1) the concept of elasticity of demand, (2) why raisingprices without understanding the elasticity would bea bad move, (3) your recommendations for measurement, and (4) the potential impact on profits for elasticand inelastic demandCreative Homework/Short Project Assume that you arean entrepreneur who runs a bakery that sells glutenfree breads and cakes. You believe that the currenteconomic conditions merit an increase in the price ofyour baked goods. You are concerned. however, thatincreasing the price might not be profitable becauseyou are unsure of the price elasticity of demand for yourproducts. Develop a plan for the measurement of priceelasticity of demand for your products. What findingswould lead you to increase the price? What findingswould cause you to rethink the decision to increaseprices? Develop a presentation for your class outlining(I) the concept of elasticity of demand, (2) why raisingprices without undetstanding the elasticity would bea bad move. (3) your recommendations for measurement. and (4) the potential impact on profits for elasticand inelastic demandPRICE (Dollars per bippitybop) 282 283 2 120 110 100 90 80 70 50 30 20 10 0 X8 05 10 15 20 25 30 35 40 QUANTITY (Bippitybops) Demand 45 50 55 60 Total Revenue On the following graph, use the green point (triangle symbol) to plot the annual total revenue when the market price is $20, $30, $40, $50, $60, $70, and $80 per bippitybop.
