Quiz econ Free Essays

When costs fall, the supply curve increases or shifts to the right. Since changes in producer costs is not a demand factor, there would be no impact on demand. Points Received: 10 of 10 Comments: Question 2. We will write a custom essay sample on Quiz econ or any similar topic only for you Order Now Question : (TCO A) Ceteris paribus, Brand A Plain potato chips and Brand B Plain potato chips are substitutes in consumption. The price of Brand A Plain potato chips increases. (4 pts. ) a. What happens to the demand for Brand B Plain potato chips? (6 pts. ) b. What happens to the demand for Brand A Plain potato chips? a) As price of A rises demand for A falls so that demand for B rises. The demand curve for B shifts to the right b)As price of A rises, demand for A falls due to law of demand. The demand curve moves along the upward direction. Instructor Explanation: a. When the price of a substitute good rises, the demand for the other good increases. Price of Brand A rises demand for Brand B increases. b. This tests your ability to distinguish between a change in demand and a change in quantity demanded. When the price of Brand A rises THERE IS NO EFFECT ON THE DEMAND for Brand A potato chips. Remember that the Price of the good itself is NOT a Determinant of Demand for that good. Points Received: 6 of 10 Comments: In (b) when the price ofa good changes that only affects quantity demanded. The demand for Brand A remains unchanged (no shift of the demand curve). See instructor explanation, Chapter 3, and the tutorial in week 1 on the difference between a change in demand and a change in quantity demanded. When you say there is a change in demand you are saying that something other than price has SHIFTED the demand curve. Question 3. Question : SA 3. (TCO A) The number of wheat producers decreases. (4 pts. ) What happens to the supply of wheat? 6 pts. ) What happens to the demand for wheat? 100 20†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 300 ) It the number ot wheat producers decrease supply tor wheat will decrease and prices might go up. b) The demand for wheat will stay the same. Instructor Explanation: Instructor Explanation: The supply of wheat would decrease, or shift to the left. The number of suppliers is obviously a supply factor, so the less suppliers thare are, the smaller would be the supply. The demand for wheat remains the same as before because the number of suppliers is a supply factor, not a demand factor. Points Received: 10 of 10 Question 4. Question : (TCO A) A market is in equilibrium with equilibrium Quantity of MEQ and equilibrium nce of MEP. (2 pts. ) a. What happens to Market Equilibrium Quantity (MEQ) if there is an increase in Demand? (4 pts. ) b. What happens to Market Equilibrium Price (MEP) if Supply decreases as Demand increases? (4 pts. ) c. What happens to Market Equilibrium Quantity (MEQ) after there has been an increase in Supply followed by a decrease in Demand which is followed by another increase in Supply? ) If their is an increase in demand then the price will rise because their is a move from Dl to D2 b)When supply decreases prices go down and demand increases until their is a new equilibrium. c)an increase in supply will lower rices and move sl tos2, a decrease in demand will lower prices, following an increase in supply will lower prices, overall the price will go down. Instructor Explanation: a. MEQ increases b. MEP increases c. MEQ is indeterminate as the sh ifts force Quantity in different directions and the sizes of the shifts are not given. Points Received: O of 10 Comments: Please see instructor explanations for all 3 parts here. You have not answered the questions asked. Question 5. Question : The following table shows part of the demand function for tickets to an outdoor summer concert by a popular singing group: pnce (P)†¦ quantity (Q) 5†¦. 180 (2 pts. ) What is demand elasticity in the $10- $20 price range? Is demand elastic, inelastic, or of unitary elasticity? Calculate the value and show all of your work. Be sure to use the midpoint equation used to determine elasticity. b. (4 pts. Assume demand elasticity is 1. 3 in the $35 – $50 price range. In this range of demand, by what percentage would quantity demanded change if price increases by 9 percent? Show your detailed calculations. (4 pts. ) What is the effect of a price decline from $35 to $20 on total revenue for the event? Does total revenue (TR) increase, decrease, or remain the same? By how much? Show your detailed calculations. a) 200/300 = . 6667 10-20/20=. 5, . 6667/-. 5=1. 3334, demand elastic b)38. 1 20*300 =6000 Total revenue decreases by 300 Instructor Explanation: a. Using the recommended mid-point formula for calculating elasticity one can see that demand is slightly inelastic in this range since the calculated elasticity value equals 0. 746 which is slightly less than 1. 0. Ed † [change in Q / (sum of Q/2)] / [change P/ (sum ofP/2] = [(500- 300)/800/2] / [(20 -10)30/2] = . 50/-. 67 = 1. 7461, rounding.. b. For this question the point elasticity formula is best since it contains all of the mportant elements in the one formula. Since Ed = %change Q / %change P, according to the point elasticity formula rearranging the equation and solving for %change Q, gives us %change Q = (%change P)(Ed). Thus, in this case, %change Q (9) (1. 3) = a decline of 11. 7 percent. c. This question can be answered in 2 ways: (1) You could calculate the elasticity in the $35 – $20 range. This is [(300- 180) / 480/2] / [(20- 35) / 85/2] = [120 / 240] / [15 / 43] = 0. 50 / 0. 55 = -0. 909, rounding. Since we have slightly inelastic demand in this range we know that lowering price will esult in an DECREASE in total revenue; or (2), Simply calculate the total revenue at the two prices at $20 total revenue is $20 x 300 = $6,000, and at $35, total revenue $35 x 180 = $6?00. o total revenue DECREASES when the pnce lowered to $20 from $35. Points Received: 6 of 10 Comments: Please see instructor explanations for the 1st and 2nd parts here. Question 6. Question : (TCO B) Use a hypothetical example to illustrate whether you agree or disagree with the following statement: â€Å"Unemployment will go up more if the demand for labor is inelastic because the demand tor labor will decrease more when you nave inelastic emand than if demand were elastic. † Explain why, using hypothetical numbers to illustrate your case. Disagree, Unemployment will not go up if the demand for labor is inelastic. demand for labor would be inelastic when the change in demand for labor is less than or equal to 1, and it will not have an impact on unemployment when the change in labor is elastic it is greater than or equal to 1 so it will have an impact on unemployment. Instructor Explanation: The unemployment impact would be greater in the case of elastic demand. Starting with an equilibrium quantity f labor equal to, say, 100 units, an increase in the minimum wage would reduce the quantity of labor demanded. Let us say that demand is inelastic and that Ed = 0. 5. Suppose the minimum wage increases by 10 percent. The quantity of labor demanded would fall by = 5 percent. Alternatively if demand was elastic such that Ed= 2 (say), then the quantity of labor demanded would fall by = 20 percent. Clearly, unemployment is impacted far more in the latter case (elastic demand) than it is in the former (inelastic demand). Points Received: 5 of 10 Comments: Please see instructor explanation regarding the reason why the tatement is false, and the hypothetical example. Question How to cite Quiz econ, Papers