Exploring Macroeconomics
8th Edition
ISBN: 9781544337722
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 7, Problem 8P
To determine
The size of the resulting apartment storage if the government imposes a
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The current price for a good is $25, and 90 units are demanded at that price. The price elasticity of demand for the good is -1.5.
When the price of the good drops by 8 percent to $23, consumer surplus by $(Enter your response to the nearest penny)
increases
decreases
HOW DO YOU RESPOND TO PRICE ELASTICITY?
People have unlimited needs and wants for their personal satisfaction and because of that the prices
of products easily get changed.
Everyone is affected with the new normal in the market. The prices of products have become very
expensive since the outbreak of the pandemic, not only in our locality, but in the whole world.
If your income or the income of your family is not enough to purchase the basic commodities
needed by your family, what goods would you buy, instead?
What economic or marketing strategies would you apply? How would you respond to the price
changes of these commodities?
The demand of world crude oil is described as P=200-1.2Q where P is in $ per barrel and Q is in millions of barrels per day. Recent Ukraine-Russia war pushed the oil price from $90 to $130 a barrel. Please calculate the before and after price elasticities of demand and explain the implications of the change in price elasticity of demand.
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Similar questions
- Prove that price elasticity of demand is not the same as the slope of a demand curve.arrow_forwardWho would pay a tax imposed on the supplier when the price elasticity of supply is inelastic and the price elasticity of demand is elastic?arrow_forwardWhich of the following would not cause market demand for a normal good to decline? a. An increase in the price of a substitute b. An increase in the price of a complement c. A decline in consumer income d. Consumer expectations that the good will go on sale in the near future e. An announcement by the Surgeon General that the product contributes to premature deatharrow_forward
- For each of the following, identify where demand is elastic, inelastic, perfectly elastic, perfectly inelastic, or unit elastic: a. Price rises by 10 percent, and quantity demanded falls by 2 percent. b. Price falls by 5 percent, and quantity demanded rises by 4 percent. c. Price falls by 6 percent, and quantity demanded does not change. d. Price rises by 2 percent, and quantity demanded falls by 1 percent.arrow_forwardif the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will:arrow_forwardRefer to the demand schedule below: Price Quantity demanded ($) 80 0 70 50 60 100 50 150 40 200 30 250 20 300 10 350 0 400 Suppose the price increases from $10 to $20. Demand is inelastic and total revenue increasesarrow_forward
- The government is considering an increase in the tax on gasoline. They know that the price elasticity of demand for gas is -0.25. The current price is $2.00 per gallon. They are willing to allow the quantity of gas sold to fall by 10%. What would be the approximate tax increase (in cents per gallon) that would lead to a 10% reduction in quantity demanded? Multiple Choice 8 cents 40 cents 80 cents 20 cents 25 centsarrow_forwardThe current price for a good is $20, and 90 units are demanded at that price. The price elasticity of demand for the good is - 2. (Enter your response to the nearest penny.) When the price of the good drops by 10 percent to $18, consumer surplus increases by $arrow_forwardEnergy markets, such as the market for natural gas and electricity, have been known to be characterized by inelastic demand. However, recent research discussed in the August 25, 2022 issue of The Economist, indicates that while the responsiveness of quantity demanded in response to price changes indeed is “inelastic” (i.e., the absolute value of price elasticity of demand is still less than 1), the percentage change in quantity demanded in response to a change in price is much larger than earlier research indicated. Answer these narrative questions. No graphs are needed. What does “inelastic demand” formally mean? In addressing this part of the question, please make sure to explain the concept of the price elasticity of demand using a simple formula and by providing a short narrative. Policymakers are encouraging people to conserve energy in response to the growing energy crisis. Discuss the positives (pros) and negatives (cons) of providing subsidies to consumers in this situation…arrow_forward
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