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- Discuss the effect of elasticity of demand on consumer and producer surplus and give examples.1. Suppose that the demand curve for a particular high-end designer purse in a medium-sized city is given by P = 600 – 0.01Q? and supply is P= 100+0.04Q², where price is in dollars and quantity is in numbers of purses. a. Find the equilibrium price and quantity. b. Calculate the consumer and producer surplus at the equilibrium price. in17. How can the elasticity of demand help in pricing strategy? Explain.
- Imagine an excise tax levied on the sellers of cigarettes. Assume that the tax is $2.00 per pack. Assume that the market for cigarettes is perfectly competitive. a. Draw a downward sloping market demand curve for cigarettes and an upward sloping supply curve. Draw the demand curve to represent fairly inelastic demand with respect to price (but not completely vertical.) Draw the supply curve to represent fairly elastic supply with respect to price (but not completely horizontal). Label the horizontal axis as the quantity of packs of cigarettes and the vertical axis the price per pack. b. What happens to the equilibrium quantity of cigarette packs once the tax is imposed? c. Is there a reduction in consumer and producer surplus? If so, show the reduction in the graph. d. What happens to the price paid by the consumer and the price received by the seller in this transaction? Who bears more of the economic incidence of the tax?3. In the market for Samsung Galaxy S22, the demand function is Q = 200 - 2P, while the supply function is Q = 2P - 20, where P denotes the price, and Q the quantity of Samsung Galaxy S22. a. Calculate the equilibrium price and quantity! b. To reduce addiction to social media, the government imposes a specific tax of $5 on sellers. Calculate the new equilibrium price and quantity c. Now suppose the tax of $5 is imposed on buyers rather than sellers. Find the new equilibrium price and quantity.1. Suppose the demand for towels and supply of towels are given by the below: QD = 100 - 4P QS = P a. Find the equilibrium price and quantity using demand and supply functions above. b. Plot demand and supply curve on the same graph and point out the equilibrium quantity and price. You should draw each graph precisely with intercepts and slopes. c. Solve for the price elasticities of demand and supply at the equilibrium point. Which is more elastic: demand or supply? Simply explain why. d. Suppose there was a demand shock so that at each price 20 more towels are demanded since consumers want more. Plot the new demand curve on the graph that you derive in part (a). Find the new equilibrium price and quantity. (Hint: You may derive a new demand function by adding a constant to find a new equilibrium price and quantity.)
- which of the following goods would be most inelastic in demand? -Ford -Cars -Toyota -Ford Escape -Dont have enough information in the question we can conclude that the good is ____in demand -elastic -unit elastic -inelastic -perfectly inelastic -perfectly elasticConsider the following excerpt: "Steve Cannon, CEO of the AMB Group, Blank's holding company, told ESPN that although food and beverage prices ere 50 percent lower in its new Mercedes-Benz Stadium than the prices in the Georgia Dome the previous year, fans spent 16 percent more." If there has been no change in the demand for concessions at football games, which of the following is true? Oa. Demand for concessions is always elastic b. At the initial prices, demand was inelastic. Oc. The demand curve for concessions slopes upwards Od. Concessions are an inferior good2. What is the application of the “elasticity” concept in economics? How does it help a producer decide the revenue maximizing price? Explain.
- Consider the following pairs of goods. In each case, which would you expect to have the more elastic demand? Why? e. personal computers or IBM personal computersQ2 Suppose the price elasticity of demand for the market of mobile phones is 0.90. a.If all mobile-phone companies simultaneously increased their prices, will total revenue in the industry increase or decrease? b.If a single mobile-phone company increased its price, would you expect the company’s total revenue to increase or decrease? Explain. c.Suppose that the price in the market is initially $10 and the quantity demanded is 100 units. If the price in this market increases by 10%, what will be the percentage change in the quantity demanded?Many movie consumers who used to rent DVDs are now patronising online video rentals, especially, streaming services. a. What impact did the advent of online video rentals and streaming have on the in-store movie industry? Use the demand and supply diagram to illustrate your answer. State all your assumptions. b. Which would be more price elastic, the demand for Netflix online streaming or the demand for online movie rentals in general? c. Would the price elasticity of demand for online movie rentals and in-store movie rentals be positive or negative? what does yoyr answer imply for the equilibrium price and quantity of online movie rentals? Use the demand and supply diagram to illustrate your answer. d. Because of COVID-19, most people are staying indoors yet they cannot afford online streaming movies, like Netflix. Should the Government regulate the price of online streaming? discuss pros and cons of price regulation.
