Consider two types of cars: 1) Performance cars, which emphasize good performance (good mileage, towing capacity, horsepower, etc). 2) Luxury cars, which emphasize good looks Let's say that with the higher gas prices Americans care less about how their cars look and more about how they perform. We'd therefore expect to see in the market for performance cars and in the market for luxury cars.
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- Consider public policy aimed at smoking.a. Studies indicate that the price elasticity of demandfor cigarettes is about 0.4. If a pack of cigarettescurrently costs $5 and the government wantsto reduce smoking by 20 percent, by how muchshould it increase the price?b. If the government permanently increases theprice of cigarettes, will the policy have a largereffect on smoking one year from now or five yearsfrom now?c. Studies also find that teenagers have a higherprice elasticity of demand than adults. Why mightthis be true?3In the United States, the long-run elasticity of oil demand has been estimated at -0.5. Somepolicymakers and environmental scientists would like to see the United States cut back on its useof oil in the long run. We can use this elasticity estimate to get a rough measure of how high theprice of oil would have to permanently rise in order to get people to make big cuts in oilconsumption. How much would the price of oil have to permanently rise in order to cut oilconsumption by 50%?Table 3.8 shows information on the demand andsupply for bicycles, where the quantities of bicycles aremeasured in thousands. a. What is the quantity demanded and the quantitysupplied at a price of $210?b. At what price is the quantity supplied equal to48,000?c. Graph the demand and supply curve for bicycles.How can you determine the equilibrium priceand quantity from the graph? How can youdetermine the equilibrium price and quantityfrom the table? What are the equilibrium priceand equilibrium quantity?d. If the price was $120, what would the quantitiesdemanded and supplied be? Would a shortageor surplus exist? If so, how large would theshortage or surplus be?
- In 2018, a cold front in Barbados increased both the demand for water heaters andgasolines. The usage of gasoline was 581 tonnes, an increase from 499 tonnes in theprevious year. The Petroleum Company of Barbados advised Government officials thatdemand could outweigh supply and asked companies to increase the supply. They alsoasked major gasoline users, such as power plants, to reduce demand. iv. Discuss one factor EACH that you think influence demand and supply for waterheaters. Provide examples v. Is demand for gas is price elastic or price inelastic? Explain your reasoningThe Krampf Lines Railway Company specializesin coal handling. On Friday, April 13, Krampf hadempty cars at the following towns in the quantitiesindicated: Town Supply of Cars Morgantown 35 Youngstown 60 Pittsburgh 25 By Monday, April 16, the following towns will needthe numbers of coal cars listed: Town Demand for Cars Coal Valley 30 Coaltown 45 Coal Junction 25 Coalsburg 20 Using a railway city-to-city distance chart, the dis-patcher constructs a mileage table for the preceding towns. The result is shown in the table on this page.Minimizing total miles over which cars are movedto new locations, compute the best shipment of coalcars.3. Setormilients of demand The following grapn enews comano curve for secans (for example, Toyota Camrys or Honda Accords) in New York City. For simplicity, assume that are arcical and mail for the same price. Initially, the graph shows market demand under the following circumstances: Average household COMES $50,000 per year, the face of a gallon of gas is $4.00 per gallon. 1808 the wiput cool to help you answer the following questions you will not be graded on any changes you make to this graph. Note. Once you intevole in a white teld, the graph and any corresponding amounts in each grey field will change accordingly. Damund for Seciamy Demand 40000 900 100 300 QUANTITY (Sedans per month) Graph Input Tool Demand for Sedans Price of a sedan 25 (Thousand of dollars) Quantity 338 Demanded (Sedens per month) Demand Shifters Average Income (Thousands of dollars) 50 Price of Gas (Dollars per gallon) E Consider the grabil Suppose that the price of a sedan decreased from $25,000 to $20,000.…
- 11. Consider public policy aimed at smoking. a. Studies indicate that the price elasticity ofdemand for cigarettes is about 0.4. If a packof cigarettes currently costs $2 and thegovernment wants to reduce smoking by20 percent, by how much should it increasethe price? b. If the government permanently increasesthe price of cigarettes, will the policy have alarger effect on smoking one year from nowor five years from now? c. Studies also find that teenagers have ahigher price elasticity than do adults. Whymight this be true?Would you expect supply to play a more significant role in determining the price of a basic necessity like food or a luxury like perfume? Explain. Hint: Think about how the price elasticity of demand will differ between necessities and luxuries.Figure 4-19 The diagram below pertains to the demand for turkey in the United States. ↑price DB O x to y. Oy to x. O DA to DB- O D₂ to DA DA quantity Refer to Figure 4-19. All else equal, the premature deaths of thousands of turkeys would cause a move from
- The 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.A company is considering building a bridge across ariver. The bridge would cost $2 million to build andnothing to maintain. The following table shows thecompany’s anticipated demand over the lifetime ofthe bridge:Price per CrossingNumber of Crossings,in Thousands$8 07 1006 2005 3004 4003 5002 6001 7000 800a. If the company were to build the bridge, whatwould be its profit-maximizing price? Would thatlevel of output be efficient? Why or why not?b. If the company is interested in maximizing profit,should it build the bridge? What would be itsprofit or loss?c. If the government were to build the bridge, whatprice should it charge?d. Should the government build the bridge?Explain.Que 1: Show and explain how each of the following will affect the current supply (increase supply or decrease supply ) for bicycle. a. A rise in wage rates b. An increase in the number of sellers of bicycle. c. A tax placed on the production of bicycle. d. A subsidy placed on the production of bicycle. Que 2:. Consider the following statements. show and explain whether the demand curve will shift leftward/downward or rightward/upward. a. An increase in income(the good under consideration is an inferior good) b. A rise in the price of a complementary good. c. A fall in the price of a subtitute good. d. A rise in the number of buyers.