Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 4, Problem 18APA
To determine
Types of price elasticity.
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The accompanying table shows the price and monthly demand for barrels of gosum berries in Gondwanaland.
Price of gosum berries per barrel
Native demand for gosum berries per month
$100
0
$90
100
$80
200
$70
300
$60
400
$50
500
$40
600
$30
700
$20
800
$10
900
$0
1,000
A) Using the midpoint method (show your work), calculate the price elasticity of demand when the price of a barrel of gosum berries rises from $10 to $20. What kind of elasticity is this value that you computed for the price elasticity of demand, and what does it mean for how demand will change based on a change in price within this price range?
(Enter your response here.)
B) Using the midpoint method (show your work), calculate the price elasticity of demand when the price of a barrel of gosum berries rises from $70 to $80. What kind of elasticity is this value that you computed for the price elasticity of demand, and what does it…
Step 1
Analyze gasoline price hike statistics in the following scenario.
In June 2008, the U.S. retail gas price jumped from $3 to $4 a gallon.
This is a 33% increase in price from January 2008.
During that time, the total quantity of gasoline purchased fell by 3%.
Supplies of gasoline produced also decreased from 1 million barrels to 800,000 barrels.
No viable substitute has been created to replace gasoline.
Step 2
Calculate the price elasticity of gasoline Be sure to show all work.
Calculate the price elasticity of demand for gasoline.
Calculate the elasticity of supply using the information provided.
Calculate the changes in consumer and producer surplus.
Because there is no viable substitute for gasoline at this time, what can you say about the cross-elasticity and income elasticity of supply and demand for gasoline?
Is the demand for gasoline elastic, inelastic, perfectly elastic or inelastic, or unit elastic?
Use the following as a guide for your calculation
To show…
Border Crossings from the USA into British Columbia , Canada Up 15 Percent
Cheap gasoline brought 964,000 American visitors through border crossings in B.C. during the first four months of 2016, a 15 percent increase from the previous year.
(Source: Vancouver Sun, July 9, 2016)
The U.S. energy Information Administration reports the average price of gasoline was $2.83 a gallon in July 2015 and $2.22 a gallon in July 2016.
Calculate the price elasticity of demand for British Columbia border crossings and interpret your results in non-economic terms
With COVID-19 and the temporary closure of the Canada-US border to non-essential travel, is the concept of price elasticity of demand still relevant to doing business in Canada, especially in the travel and tourism sector? Explain briefly.
Chapter 4 Solutions
Macroeconomics
Ch. 4.1 - Prob. 1RQCh. 4.1 - Prob. 2RQCh. 4.1 - What makes the demand for some goods elastic and...Ch. 4.1 - Prob. 4RQCh. 4.1 - Prob. 5RQCh. 4.2 - Prob. 1RQCh. 4.2 - Prob. 2RQCh. 4.2 - What does the cross elasticity of demand measure?Ch. 4.2 - Prob. 4RQCh. 4.3 - Prob. 1RQ
Ch. 4.3 - Prob. 2RQCh. 4.3 - Prob. 3RQCh. 4.3 - Provide examples of goods or services whose...Ch. 4.3 - Prob. 5RQCh. 4 - Rain spoils the strawberry crop, the price rises...Ch. 4 - Prob. 2SPACh. 4 - Prob. 3SPACh. 4 - Prob. 4SPACh. 4 - Prob. 5SPACh. 4 - Prob. 6SPACh. 4 - Prob. 7SPACh. 4 - Prob. 8SPACh. 4 - The table sets out the supply schedule of jeans....Ch. 4 - Prob. 10APACh. 4 - The figure shows the demand for DVD rentals. a....Ch. 4 - Prob. 12APACh. 4 - Prob. 13APACh. 4 - Prob. 14APACh. 4 - Prob. 15APACh. 4 - Prob. 16APACh. 4 - Prob. 17APACh. 4 - Prob. 18APACh. 4 - When Alexs income was 3,000, he bought 4 bagels...Ch. 4 - Prob. 20APACh. 4 - Prob. 21APACh. 4 - Prob. 22APACh. 4 - The table sets out the supply schedule of...Ch. 4 - Prob. 24APACh. 4 - Prob. 25APACh. 4 - Prob. 26APACh. 4 - Prob. 27APA
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- The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?arrow_forwardThe graph shows the demand curve for streaming subscriptions. The price of a subscription is $15 a month. Price (dollars per month) 30- 25- 20- 15- 10- 5- 5 10 15 20 25 30 35 40 Quantity (millions of streaming subscriptions) What is the value of the 10 millionth subscription? What is the maximum amount someone is willing to pay for the 30 millionth subscription? The value of the 10 millionth subscription is a month, and the maximum amount someone is willing to pay for the 30 millionth subscription is a month.arrow_forwardFind an article in The Wall Street Journal or The Economist that was published after 12/1/23 describing a change in price or quantity or both in some market. Analyze the situation using economic reasoning. A reference must be provided for the article Has there been an increase or decrease in demand? Factors that could shift the demand curve include changes in preferences, changes in income, changes in the price of substitutes or complements, or changes in the number of consumers in the market. Has there been an increase or decrease in supply? Factors that could shift the supply curve include changes in costs of materials, wages, or other inputs; changes in technology; or changes in the number of firms in the market. Draw a supply-and-demand graph to explain this change. Be sure to label your graph and clearly indicate which curve shifts. If done neatly, you can draw the graph by hand and paste it in your documentarrow_forward
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