The paper “ Demand and Supply Curve of the Packs of Sweets, Demand Schedule for Computer Chips, and Price Ceiling” is a persuasive variant of the assignment on macro & microeconomics. A price decrease from $400 to $350 raises the total revenue from $12,000,000 to$ 12,250,000.a price fall from $350 to $300 reduces the total revenue from $12,250,000 to $ 12,000,000. b) The elasticity of demand=% change in revenue/% change in demand = (12000-12250/122500*100)/ (400-350/350*100) = -2.04/14.28 =0.143 The demand is elastic implying that a unit decrease in demand reduces the revenue by 0.14 units. d) Income elasticity of demand =% change in demand/%change in income. (8-4/4*100)/ (5000-3000/3000*100) = 4/4*100/2000/3000*100 = 1.49%. it implies that a unit increase in income leads to an increase in demand for bagels by 1.49. e) Income elasticity of demand for donuts =% change in demand/% change in income = (6-12/12*100)/ (5000-3000/3000*100) = -50/66.67 = - 0.75 0.75 implies that a unit change in income leads to a decrease in demand for donuts by 0.75.the good, in this case, can be categorized as Geffen goods whereby it’ s demand decrease with an increase in demand f) The elasticity of demand 0.5 means, an increase in price by one unit causes an increase in demand by 0.5.
A cut in the quantity of wheat will increase the demand and hence a rise in price. Therefore; -0.02/p%= 0.5 = 0.04 The price will increase by 0.04% g) Price elasticity of demand of pasta = % change in quantity/% change in price = -8%/25% = - 0.32 It implies that an increase in price of pasta by one unit leads to a decrease in demand of pasta by 0. 32. h) Cross elasticity = % change in the quantity demanded for pasta sauce/ % change in price for pasta. = -5%/25 = -0.2 This implies that an increase in price for pasta by one unit leads to a decrease in the quantity demanded pasta sauce by 0.2 units.
The two goods are complements since an increase in the price of one good lead to a decrease in demand for another market.
Bhagwati, J. N., Panagariya, A., & Srinivasan, T. N. (2001). Lectures on international trade. Cambridge, Mass. [u.a.], MIT Press
Feenstra, R. C. (2004). Advanced international trade theory and evidence. Princeton, N.J., Princeton University Press. http://site.ebrary.com/id/10333511.
Mankiw, N. G., & TAYLOR, M. P. (2007). Microeconomics. London [u.a.], Thomson.
Mceachern, W. A. (2012). Macroeconomics: a contemporary introduction. Mason, OH, South-Western Pub.
Mceachern, W. A. (2012). Microeconomics: a contemporary introduction. Mason, OH, South- Western Cengage Learning.
Mceachern, W. A. (2014). Macroeconomics: a contemporary introduction. .
Taylor, J. B. (2008). Economics. Boston, Mass, Houghton Mifflin.