Data collected from the economy of Royal City reveals that an 18% decrease in income leads to the following changes: • A 6% decrease in the quantity of chips demanded • A 17% increase in the quantity of spades demanded • A 29% decrease in the quantity of diamonds demanded Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on its income elasticity, indicate whether each good is a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign confers important information.) Good Income Elasticity of Demand Normal or Inferior Good Chips Spades Diamonds Which of the following three goods is most likely to be classified as a luxury good ? Diamonds Spades Chips

Data collected from the economy of Royal City reveals that an 18% decrease in income leads to the following changes: • A 6% decrease in the quantity of chips demanded • A 17% increase in the quantity of spades demanded • A 29% decrease in the quantity of diamonds demanded Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on its income elasticity, indicate whether each good is a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign confers important information.) Good Income Elasticity of Demand Normal or Inferior Good Chips Spades Diamonds Which of the following three goods is most likely to be classified as a luxury good ? Diamonds Spades Chips

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If income elasticity of demand for a good is positive, we say that good is a normal good. You can use the following approach to calculate the income elasticity of demand for a good: Group of answer choices % change in quantity supplied / % change in income % change in income / % change in quantity demanded % change in quantity demanded / % change in income % change in quantity demanded / % change in income tax rates
Suppose that your demand schedule for compact discs is as follows Quantity Demanded (income-$10, 000) 40 CDs Price $8 $10 $12 $14 $16 32 24 16 8 Quantity Demanded (income $12, 000) 50 CDs 45 322 30 20 12 a. Use the midpoint method to calculate your price elasticity of demand as the price of compact dises increase from $8 tp, $10 if (i) your income is $10,000 and (ii) your income is $12,000. b. Calculate your income elasticity of demand as your income increases from $10,000 to $12,000 if (i) the price is $12 and (ii) the price is $16. Use the midpoint method.
Increase or decrease
Draw and label a graph that depicts a linear, downward-sloping demand curve for beef brisket. Assume that when Walmart increases the price of beef brisket the revenue from sales of beef brisket increases. Assume that the demand for brisket does not change (the demand curve does not shift). Is the demand for beef brisket price-elastic or price-inelastic?
Imagine that the table shows the quantity demanded of UGG boots at five different prices in 2021 and in 2022. Which of the following variables could cause the demand for UGG boots to change as indicated from 2021 to 2022? (Check all that apply.) A. The expectation that UGG boots will fall in price. B. A decrease in the price of UGG boots. C. An increase in the number of buyers. D. A decrease in the price of a complementary good. A Price $160 170 180 190 200 Quantity Demanded 2021 8,000 7.500 7,000 6,500 6,000 Quantity Demanded 2022 9,000 8,500 8,000 7,500 7,000
Imagine that the table shows the quantity demanded of UGG boots at five different prices in 2021 and in 2022. Which of the following variables could cause the demand for UGG boots to change as indicated from 2021 to 2022? (Check all that apply.) A. The expectation that UGG boots will rise in price. B. A decrease in buyer incomes. C. An increase in the price of UGG boots. D. An increase in the price of a complementary good. Price $160 170 180 190 200 Quantity Demanded 2021 8,000 7,500 7,000 6,500 6,000 Quantity Demanded 2022 7,000 6,500 6,000 5,500 5,000
ACTIVITY I Problem Solving and Graphing. Refer to the schedule of the demand for tomatoes to answer the questions that follow. Use and attach a graphing paper for your answers, solutions, and graphs. Price per kilo Quantity Demanded 15 480 30 400 45 320 60 240 75 160 81. Based on the information given, derive the demand equation for tomatoes in the form Qa = a - bP. 82. Assume that consumers expect the price of tomatoes to be lower next month because of oversupply: hence, the demand for onions now falls. At each of the prices on the original demand schedule, the quantity demanded is now 80 kilos lower than it was previously. Create a new demand schedule representing the lower demand for tomatoes and derive a new demand equation from the new demand schedule. 83. Graph the original and new demand curve and explain the change in demand for tomatoes caused by price expectations. 84. Now assume that due to rising incomes, tomato buyers in Pangasinan have increased their purchases, thus…
Suppose the following table describes Anns’s weekly chocolate candies purchases, which vary depending on the price of a bags of candies: Price of chocolate candies ($) Bags of chocolate candies Chewing gum Apple pie cake Milk pack 2 4 3 2 3 2,5 2 3 4 2 Compute the cross price elasticity of chewing gum with respect to the price of a bag of chocolate candies. Compute the cross price elasticity of apple pie cake with respect to the price of a bag of chocolate candies. Compute the cross price elasticity of milk pack with respect to the price of a bag of chocolate candies. Are chocolate candies and chewing gum substitutes or complements? How do you know? Are of chocolate candies and apple pie substitutes or complements? How do you know? Are of chocolate candies and milk substitutes or complements? How do you know?
The following table shows the weekly demand and supply in the market for ice cream in New York City. Price Quantity Demanded Quantity Supplied (Dollars per gallon of ice cream) (Gallons of ice cream) (Gallons of ice cream) 4 2,000 200 8 1,600 600 12 1,200 800 16 800 1,200 20 400 1,800 Based on the preceding table, plot the demand for ice cream on the following graph using the blue points (circle symbol). Next, plot the supply of ice cream using the orange points (square symbol). Finally, use the black point (cross symbol) to indicate the equilibrium price and quantity in the market for ice cream. DemandSupplyEquilibrium0400800120016002000240024201612840PRICE (Dollars per gallon of ice cream)QUANTITY (Gallons of ice cream
7. Using the income elasticity of demand to characterize goods Data collected from the economy of Pokerville reveals that a 16% increase in income leads to the following changes: • A 6% increase in the quantity of flops demanded • A 14% decrease in the quantity of spades demanded • A 29% increase in the quantity of houses demanded Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on its income elasticity, indicate whether each good is a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign confers important information.) Good Income Elasticity of Demand Normal or Inferior Good Flops Spades Houses
Suppose that your demand schedule for books is as follows: (PHOTO) (SHOW FORMULAS, STEP BY STEP PROCEDURE) Use the midpoint method to calculate your price elasticity of demand as the price of books increases from $10 to $12 if your income is $10,000. Is it elastic or inelastic? Explain. Use the midpoint method to calculate your price elasticity of demand as the price of books increases from $10 to $12 if your income is $12,000. Is it elastic or inelastic? Explain. Calculate your income elasticity of demand as your income increases from $10,000 to 12,000 if the price is $14. Calculate your income elasticity of demand as your income increases from $10,000 to 12,000 if the price is $8.