What is the point income elasticity at the initial values

Assignment Help Business Economics

Reference no: EM131246049

The McNight Company is a major producer of steel. Management estimates that the demand for the company’s steel is given by the equation Qs = 5,000 – 1,000Ps + 0.1I + 100Pa where Qs is steel demand in thousands of tons per year, Ps is the price of steel in dollars per pound, I is income per capita, and Pa is the price of aluminum in dollars per pound. Initially, the price of steel is $1 per pound, income per capita is $20,000, and the price of aluminum is $0.80 per pound.

a. How much steel will be demanded at the initial prices and income?

b. What is the point income elasticity at the initial values? What type of good is steel?

c. What is the point cross elasticity between steel and aluminum? Are steel and aluminum substitutes or complements?

Reference no: EM131246049

Questions Cloud

Labeling them appropriately : A pair of lumberjacks can use a two-person saw to cut down 25 trees in a day. A single lumberjack using a two-person saw is unable to cut down any trees. Use the appropiate drawing tool to draw the isoquants for Q=50 trees per day and Q=100 trees per..

Use the present worth-annual cost and rate of return method : An electrical energy audit indicates that the motor control center consumption is 8*10^6 kWh per year. By using high-efficiency motors a savings of 15 percent can be achieved. The additional cost for these motors is about $80,000. Assume a 20-year li..

The price elasticity for rice is estimated : The price elasticity for rice is estimated to be – 0.4 and the income elasticity is 0.8. At a price of $0.40 per pound and a per capita income of $20,000, the demand for rice is 50 million tons per year. Is rice an inferior good, a necessity, or a lu..

What is cross elasticity of demand for pipes-pipe tobacco : Acme Tobacco is currently selling 5,000 pounds of pipe tobacco per year. Due to competitive pressures, the average price of a pipe declines from $15 to $12. As a result, the demand for Acme pipe tobacco increases to 6,000 pounds per year. What is the..

What is the point income elasticity at the initial values : The McNight Company is a major producer of steel. Management estimates that the demand for the company’s steel is given by the equation Qs = 5,000 – 1,000Ps + 0.1I + 100Pa where Qs is steel demand in thousands of tons per year, How much steel will be..

Energy audit of residential heating system reveals : An energy audit of a residential heating system reveals that the boiler-burner efficiency is only 60 percent. In addition, the energy audit showed that an electric water heater is used. The house uses 1,500 gallons of oil annually at a cost of $1.40 ..

How much labor should the firm employ in the short run : Suppose the hourly wage is $10 and the price of each unit of capital is $25. The price of output is constant at $50 per unit. The production function is f(E,K) = E½K ½, so that the marginal product of labor is MPE = (½)(K/E) ½ . If the current capita..

What happens to employment in a competitive firm : What happens to employment in a competitive firm that experiences a technology shock such that at every level of employment its output is 200 units/hour greater than before?

Effect change the firm employment and capital stock : Consider a firm for which production depends on two normal inputs, labor and capital, with prices w and r, respectively. Initially the firm faces market prices of w = 6 and r = 4. These prices then shift to w = 4 and r = 2. In which direction will th..

User Account

All Pages