Assignment
Question 1
Use the following demand schedule to answer the question parts below.
|
Point
|
Price
|
Quantity Demanded
|
Quantity Supplied
|
|
A
|
$10
|
150
|
975
|
|
B
|
$9
|
200
|
800
|
|
C
|
$8
|
230
|
650
|
|
D
|
$7
|
260
|
500
|
|
E
|
$6
|
275
|
410
|
|
F
|
$5
|
300
|
300
|
|
G
|
$4
|
320
|
200
|
|
H
|
$3
|
350
|
150
|
|
I
|
$2
|
400
|
120
|
|
J
|
$1
|
500
|
100
|
a) Calculate the arc elasticity of demand between each point and its neighbor (that is, from A to B, B to C, etc.) and determine whether each value is price elastic, price inelastic, or unit elastic
b) Calculate the arc elasticity of supply between each point and its neighbor (that is, from A to B, B to C, etc.)and determine whether each value is price elastic, price inelastic, or unit elastic
c) Calculate the arc elasticity of demand between A and F, A and D, and A and Band determine whether each value is price elastic, price inelastic, or unit elastic
d) Calculate the arc elasticity of supply between A and F, A and D, and A and Band determine whether each value is price elastic, price inelastic, or unit elastic
Question 2
Construct the following graphs using Microsoft Excel.
a) A graph showing the demand curve for insulin (it should be perfectly inelastic) and use a generic label for each axis
b) A graph showing the demand curve for wheat (it should be perfectly elastic) and use a generic label for each axis
Question 3
Suppose that Janice buys the below amounts of various food items depending on her annual income.
|
Annual Income
|
Hamburgers
|
Pizza
|
Ice Cream Sundae
|
|
$29,816
|
898
|
416
|
759
|
|
$41,530
|
524
|
934
|
759
|
a) Calculate the income elasticity of demand for each good.
b) Use the calculated elasticity to identify whether each good is normal or inferior by typing "inferior", "normal", or "unrelated".
Question 4
Suppose the following table describes Jocelyn's annual snack purchases, which vary depending on the price of a bag of chips.
|
Price of Chips
|
Bags of Chips
|
Containers of Salsa
|
Bags of Pretzels
|
Cans of Soda
|
|
$1.53
|
461
|
392
|
234
|
402
|
|
$2.69
|
123
|
76
|
393
|
402
|
a) Calculate the following elasticities.
a. Elasticity of demand for Chips
b. Cross price elasticity of Salsa
c. Cross price elasticity of Pretzels
d. Cross price elasticity of Soda
b) Use the calculated elasticity to determine how the goods are related by typing "complements", "substitutes", or "unrelated".
Question 5
Suppose that you own a local chain of 10 grocery stores that sell oranges. (Assume that the grocery stores are all the same in terms of customer composition, products sold, etc.) You are interested in determining whether or not you are maximizing revenue on the oranges you sell. Devise a plan to calculate the arc elasticity of demand for the oranges. What data would you need? How could you get that data? How do you use the raw data to tell you if you're maximizing revenue?
Question 6
Discuss the costs and benefits of government price controls on agricultural products. Who benefits? Who pays more?