Question

The Sylvan Corporation produces wood sorrels. The price elasticity of demand is 0.25. a. What will...

The Sylvan Corporation produces wood sorrels. The price elasticity of demand is 0.25.

a. What will happen to the quantity demanded if Sylvan raises its price by 10 percent?

b. What will happen to Sylvan’s revenues following this price increase?

• Suppose that the cross-price elasticity of demand for good m is 1.75 and price of good n falls by 10 percent.

a. What is the relationship between good m and good n?

b. How will the fall in the price of good n affect sales of good m?

• Suppose that the income elasticity of demand for a good is 3.5.

a. How would you classify this good?

b. What increase in income is required for demand to increase by 21 percent?

Homework Answers

Answer #1

1.

a) Given the e= 0.25 i.e. demand is relatively inelastic, and increase in price by 10 percent will lead to a fall in quantity demanded by 2.5%

b) Since price increases, quantity falls and demand is inelastic, the total revenue will increase.

2.

a) Given that demand is cross price elastic ( e= 1.75 means relatively elastic demand to other goods), a fall in the price of n will lead to a fall in the demand for good m. Thus, good n and m are substitute goods.

b) A fall in the price og good n by 10% will lead to a fall in demand for good m by 17.5%

3.

a) Since income elasticity >1, the good is a normal good.

b) for an increase in demand by 21%, the income should increase by 21/3.5 = 6%.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
• The price elasticity of demand is |-2| • The income elasticity of demand is -1.5...
• The price elasticity of demand is |-2| • The income elasticity of demand is -1.5 • The cross-price elasticity of demand between your good and a related good is -3.5 a. Describe what would happen to total revenue for your good if you raised your price by 10 % b. Describe what would happen to total revenue for your good if a recession lowered incomes by 10% c. Describe what would happen to total revenue for your good if...
Determine the price elasticity of demand, the cross-price elasticity of demand or the income elasticity in...
Determine the price elasticity of demand, the cross-price elasticity of demand or the income elasticity in the following scenarios. a. Consider the market for coffee. Suppose the price rises from $4 to $6 and quantity demanded falls from 120 to 80. What is price elasticity of demand? Is coffee elastic or inelastic? b. John’s income rises from $20,000 to $22,000 and the quantity of hamburger he buys each week falls from 2 pounds to 1 pound. What is his income...
A measure of the rate of percentage change of quantity demanded with respect to price, holding...
A measure of the rate of percentage change of quantity demanded with respect to price, holding all other determinants of demand constant is a. Income elasticity of demand b. Own price elasticity of demand c. Price elasticity of market equilibrium d. Cross price elasticity of demand The value of the income elasticity of demand coefficient for Good X is  given as 0.1. This means that a. as income increases by 10 percent, quantity demanded rises by 1 percent. b. as income...
The own-price elasticity of demand for hospital services in the area equals –0.25, the income elasticity...
The own-price elasticity of demand for hospital services in the area equals –0.25, the income elasticity of demand equals 0.45, the cross-price elasticity demand for hospital services with respect to the price of nursing home services equals –0.1, and the elasticity of travel time equals –0.37. Use this information to answer the following question. Hospital services are an inferior good. True or false?
1-As we move up the demand curve, the price elasticity of demand * A) increases B)...
1-As we move up the demand curve, the price elasticity of demand * A) increases B) decreases C) becomes unitary D) does not change 2-If the price of lemonade increases relative to the price of grape juice, the demand for: * A) grape juice will decrease. B) grape juice will increase. C) lemonade will decrease. D) lemonade will increase. 3-An increase in price will result in no change in total revenue if: * A) the percentage change in price is...
QUESTION 36 The price elasticity of demand for Alpha personal computer is estimated to be -2.0....
QUESTION 36 The price elasticity of demand for Alpha personal computer is estimated to be -2.0. If the price of the computers decreases by 5%, what would be the expected percentage changes in the quantity demanded and in the total revenue for the company? a) Quantity demanded would decrease by 10% and total revenue would decreases by 5%. b) Quantity demanded would increase by 10% and total revenue would increases by 5%. c) Quantity demanded would decrease by 10% and...
7) A government wants to reduce electricity consumption by 20%. The price elasticity of demand for...
7) A government wants to reduce electricity consumption by 20%. The price elasticity of demand for electricity is -5. The government must ________ the price of electricity by ________. a) raise; 4.0% b) raise; 0.25% c) raise; 1.25% d) lower; 0.25% 8) If the quantity demanded of Sony PS3 decreased by 8% when the price of Nintendo Wii decreases by 16%, the cross price elasticity of demand between PS3 and wii is a) 0.5. b) -5. c) -2 d) 2...
(60)A perfectly inelastic demand curve has an elasticity coefficient of: (a)1 (b)0.25 (c)∞ (d)None of the...
(60)A perfectly inelastic demand curve has an elasticity coefficient of: (a)1 (b)0.25 (c)∞ (d)None of the above Akal mn wahed Extra Credit Questions-Optional (61)If the percentage change in the quantity supplied of a good is less than the percentage change in price, price elasticity of supply is: (a)Inelastic (b)Perfectly inelastic (c)Elastic (d)Unitary elastic (62)If the percentage change in the quantity demanded of a good is equal to the percentage change in price, price elasticity of demand is: (a)Inelastic (b)Perfectly inelastic...
. Suppose the income elasticity of demand for food is 0.5 and the price elasticity of...
. Suppose the income elasticity of demand for food is 0.5 and the price elasticity of demand is −0.25. Suppose also that Mia spends $10,000 a year on food, the price of food is $2, and that her income is $35,000. (10 pts) a. If a sales tax on food caused the price of food to increase to $2.50, what would happen to her consumption of food? (Hint: Because a large price change is involved, you should assume that the...
Suppose the own price elasticity of demand for good X is -3, its income elasticity is...
Suppose the own price elasticity of demand for good X is -3, its income elasticity is -2, its advertising elasticity is 4, and the cross-price elasticity of demand between it and good Y is -2. Determine how much the consumption of this good will change if: Instructions: Enter your responses as percentages. Include a minus (-) sign for all negative answers. a. The price of good X decreases by 7 percent. b. The price of good Y increases by 10...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT