Reference no: EM131425941
Elasticity problems
1. An increase in the price of hot dogs from $1.50 to $2.10 per pound increased the average number of burgers demanded per week from 300 to 360. Assuming that all other economic variables were held constant, what is the cross-price elasticity of demand between hot dogs and burgers? What does this elasticity tell you about the relationship between the two?
2. A cafe observed an increase in the demand for its coffee following a rise in the price of a cup of tea from $1.20 to $1.50. Assuming the cross price elasticity of demand for coffee with respect to change in the price of tea is +0.80, by how much (in percent) will the demand for coffee have increased?
3. The price of good X falls by 15%. As a result, the demand for a substitute good rises by 30%. What is the cross-price elasticity of demand for good Y with respect to good X?
4. Consider the markets for widgets and cogs. You study survey data and observe that if widgets cost $5, the 100 widgets are demanded. You also observe that if widgets cost $3, then 150 cogs are demanded and if widgets cost $4 then 100 cogs are demanded. If cogs cost $2, then 125 cogs are demanded. Calculate all possible price elasticities of demand. Label the elasticities as needed.
5. If Ali's income increases from $36,000 to $40,000 and the amount of donuts he consumes increases from 52 to 86, calculate the income elasticity of demand. Are the donuts normal or inferior goods?
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Firm produces output using the production function
: Suppose that a firm produces output using the production function Q=0.5L + 1.5K, where L and K represent labor and capital inputs, respectively. Suppose that the cost of L is $10 a unit and the cost of K is $ 25 a unit. What is the optimal bundle of ..
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Advantageous for him to incorporate as a C-corporation
: Mr. Bond who owns Spectre Road Construction Co. and runs it as a proprietorship, had a before-tax income last year of $140,000. His personal and family expenses are $50,000 and he has $10,000 in exemptions and deductions. If he paid himself a salary ..
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What is the marginal cost of production for the firm
: A firm produces Q with the production function Q=10k^2+10L^0.5, and K is fixed at 4 units. a. If the price of K is $5 and the price of L is $1, find the total cost of producing Q units of output? b. Using the same input prices, what is the marginal c..
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Find the company total cost of producing output level Q
: A small company uses input labor L to generate an output Q, and the production function is Q=0.25L^2. The cost of labor L is $4 a unit. Find the company's total cost of producing output level Q.
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Elasticity problems
: An increase in the price of hot dogs from $1.50 to $2.10 per pound increased the average number of burgers demanded per week from 300 to 360. Assuming that all other economic variables were held constant, what is the cross-price elasticity of demand ..
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The quantity demanded will increase by units
: You run a small business and would like to predict what will happen to the quantity demanded for your product if you raise your price. While you do not know the exact demand curve for your? product, you do know that in the first year you charged $50 ..
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What is the maximum jack can pay for the gift card
: Jack is considering buying a gift card for Sue. Sue's utility is given by U(x,y) xy. She has $12 of her own and jack is considering a gift card for 150 units of x. The price of x is 2 and the price of y is 4. What is the maximum Jack can pay for the ..
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Find all pure-strategy nash equilibria
: Consider a game that awards $30 worth of prize. There are three contestants: A, B, and C. Each of them decide to pay $15 or $30 for a ticket, or decide to buy no ticket at all. The three contestants make their decisions simultaneously and independent..
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Production function
: Given the following Production function: Qp = 100 K-0.5 L12.3 L20.35 Lfor a company whose output is developed by a firm with one capital (K) and two types of labor inputs. Derived the elasticities for each input and interpret your results.
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