EBK MICROECONOMICS
5th Edition
ISBN: 9781118883228
Author: David
Publisher: YUZU
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Chapter 4, Problem 4.16P
To determine
To evaluate:
The effect on consumption pattern and the welfare of the student on the adoption of new proposal.
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Students have asked these similar questions
Suppose that Felicia gets a tax rebate of
$2,500
to ease the effect of the sales tax. What would her consumption of food be now?
(Again,
use an arc income elasticity to answer this question instead of a point income
elasticity.)
Felicia's consumption of food would now be
nothing
units
Suppose the income elasticity of demand for food is 0.45 and the price elasticity of demand is
- 1.00. Suppose also that Felicia spends $10,000 a year on food, the price of food is $2, and that
her income is $25,000.
If a sales tax on food caused the price of food to increase to $2.50, what would happen to her
consumption of food? Because a large price change is involved, use the arc elasticity to measure
the price elasticity of demand rather than a point elasticity.
Felicia's consumption of food would decrease by 1000.00 units. (Enter your response rounded to
two decimal places.)
Suppose that Felicia gets a tax rebate of $2,500 to ease the effect of the sales tax. What would
her consumption of food be now? (Again, use an arc income elasticity to answer this question
instead of a point income elasticity.)
Felicia's consumption of food would now be 4,175.18 units. (Enter your response rounded to two
decimal places.)
Is she better or worse off when given a rebate equal to the sales tax…
Sally Henin has a price elasticity of demand for gasoline of -0.8. Her income elasticity for gasoline is 0.5. Sally's current income is $40,000 per year. Sally currently spends $800 per year on gasoline. The price of gasoline is currently $1.00 per gallon.
A contemplated excise tax on gasoline will cause the price of gasoline to rise to $1.40. What impact will the tax have on Sally's consumption of gasoline?
Since the purpose of the tax is only to discourage gasoline consumption, Congress is considering a $200 income tax rebate to lessen the burden of the gasoline tax. What impact will the rebates have on Sally's consumption of gasoline?
Assume that both the tax and rebate are implemented. Will Sally be worse off or better off?
Chapter 4 Solutions
EBK MICROECONOMICS
Ch. 4 - Prob. 1RECh. 4 - Prob. 2RECh. 4 - Prob. 3RECh. 4 - Prob. 4RECh. 4 - Prob. 5RECh. 4 - Prob. 6RECh. 4 - Prob. 7RECh. 4 - Prob. 8RECh. 4 - Prob. 9RECh. 4 - Prob. 10RE
Ch. 4 - Prob. 4.1PCh. 4 - Prob. 4.2PCh. 4 - Prob. 4.3PCh. 4 - Prob. 4.4PCh. 4 - Prob. 4.5PCh. 4 - Prob. 4.6PCh. 4 - Prob. 4.7PCh. 4 - Prob. 4.8PCh. 4 - Prob. 4.9PCh. 4 - Prob. 4.10PCh. 4 - Prob. 4.11PCh. 4 - Prob. 4.12PCh. 4 - Prob. 4.13PCh. 4 - Prob. 4.14PCh. 4 - Prob. 4.15PCh. 4 - Prob. 4.16PCh. 4 - Prob. 4.17PCh. 4 - Prob. 4.18PCh. 4 - Prob. 4.19PCh. 4 - Prob. 4.20PCh. 4 - Prob. 4.21PCh. 4 - Prob. 4.22PCh. 4 - Prob. 4.23PCh. 4 - Prob. 4.24PCh. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Prob. 4.27PCh. 4 - Prob. 4.28PCh. 4 - Prob. 4.29PCh. 4 - Prob. 4.30P
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- James consumes two types of goods: fruit and clothing. Fruits cost him $ 2 per unit, clothing costs $ 25 per unit, and his income is $ 1,000. He always spends 40% of his income on fruit, regardless of the price of fruit and clothing, as well as his income. a. What is the cross-price elasticity of its demand for fruit relative to the price of clothing? b.What is the elasticity-income of its fruit demand? Detail your answers.arrow_forwardWhen Alex's income increased from $7,000 to $9,000, he increased his consumption of bagels from 5 to 9 a month and decreased his consumption of donuts from 15 to 9 a month. Calculate Alex's income elasticity of demand for bagels and donuts. >>> Answer to 2 decimal places. >>> If your answer is negative, include a minus sign. If your answer is positive, do not include a plus sign. Alex's income elasticity of demand for bagels is? Alex's income elasticity of demand for donuts is?arrow_forwardSuppose a 4 percent increase in income results in a 2 percent decrease in the quantity demanded of a good determine what type of good it is ?arrow_forward
- Ms. Zamai spends his entire income on pizzas and siomai. She always buys positive quantities of both supposed that the cross price elasticity of demand for pizzas with respect to the price of siomai is negative. If siomai's are an ordinary good, when the price of siomai increases, What is the effect on Ms. Zamai expenditures of siomai and pizzas? Explain your answerarrow_forwardSuppose the price elasticity of demand for bread is 2. If the price of bread falls by 8 percent, the quantity demanded will increase by Multiple Choice 16 percent and total expenditures on bread will fall. 16 percent and total expenditures on bread will rise. 4 percent and total expenditures on bread will fall. 4 percent and total expenditures on bread will rise.arrow_forwardImagine your income increases and you find that you buy more coffee. What is true about your income elasticity of demand (Ei) and how you perceive coffee? Ei > 0 and you view coffee as an inferior good Ei > 0 and you view coffee as a normal good Ei < 0 and you view coffee as an inferior good Ei < 0 and you view coffee as a normal goodarrow_forward
- Suppose the income elasticity of demand for food is 0.5 and the price elasticity of demand -1.0. Suppose also that your housemate Claire spends $10,000 per year on food, that the price of food is $4, and that her income is $50,000. a) If a $4 sales tax on food were to cause the price of food to double, how much food would Claire’s consume? b) Suppose she is given a state sales tax rebate of $5,000 to ease the effect of the tax. Now how much food would she eat? c) Briefly discuss how you know whether she would be better or worse off when given a rebate to the sales tax payments?arrow_forwardMel needs your help in understanding the following problem. The price of lettuce has increased slightly from R4.00 to R5.00, causing a fall in the quantities demanded from 100 to 80 per month. However, she also noticed a decrease in the demand for tomatoes, from 150kg to 120kg, even though no price changes have occurred. Can you help her understand this behaviour by seeing if a relationship possibly exists between these two goods? [Hint: Use the elasticity coefficient as a tool for your recommendation. Show all workings. Round your answer to 4 decimal points.]arrow_forwardThe average annual income rises from $25,000$25,000 to $38,000$38,000, and the quantity of bread consumed in a year by the average person falls from 3232 loaves to 2424 loaves. Step 1 of 2: What is the income elasticity of bread consumption? Round your answer to two decimal places. Enter the results in the box below.arrow_forward
- The average annual income rises from $25,000 to $38,000, and the quantity of bread consumed in a year by theaverage person falls from 30 loaves to 22 loaves. What is the income elasticity of bread consumption? Is bread anormal or an inferior good?arrow_forwardA study of the consumption of beverages in Mexico found that: "Overall, for soft drinks a 10% price increase decreases the quantity consumed by 10.6%." Source: M.A. Colchero, et al., "Price Elasticity of the Demand for Sugar Sweetened Beverages and Soft Drinks in Mexico," Economics and Human Biology, Vol. 19, December 2015, pp. 129-137. Given this information, the price elasticity of demand for soda in Mexico is entering a negative number.) (Enter your response rounded to two decimal places. Use a negative sign if you are Is demand price elastic or price inelastic? Briefly explain. O A. Inelastic, because the percentage change in quantity demanded is less than the percentage change in price. O B. Inelastic, because the percentage change in quantity demanded is greater than the percentage change in price. O C. Elastic, because the percentage change in quantity demanded is less than the percentage change in price. O D. Elastic, because the percentage change in quantity demanded is…arrow_forwardSuppose that the price of ice cream at your local cafeteria is €1.50 per scoop and 600 scoops per day are sold. Now, assume that at the same cafeteria, the price of frozen yogurt increases €1.25 to €1.75 per scoop. While nothing else has changed that could affect customers’ buying patterns, the sale of ice cream increased from 600 to 750 scoops per day. Calculate the cross elasticity of demand of ice cream relative to frozen yogurt. Are ice cream and frozen yogurt complements or substitutes? Explain your answer with the elasticity concept.arrow_forward
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