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Suppose the demand for beer is characterized by the following elasticities: • Own price elasticity = -2.5 • Cross-price elasticity with soda = +3 • Income elasticity = +2 Based on the given elasticities, answer the following. Explain your answers.
a. If a firm in the industry wishes to increase total sales revenue (ignoring cost considerations), will it raise or lower its selling price? Why?
b. What happens to the demand for beer if the price of soda falls by 2%? Explain your answer.
c. What happens to the demand for beer if consumer income rises by 5%? Be specific.
d. Is beer a normal or inferior good? Explain.
Describe the expected amount of dollars to be paid by the Wake Forest Co. for the pesos in one year.
Consider a monopolist facing demand curve Q = 100 - P. MC=AC=$20. Find out the monopoly price, profits, and consumer surplus.
Required help using economic theory and applying to real world situations and current events.
The government decided to tax a monopolist at a constant rate of $x per unit. Show the inpact upon output and price. Is the posttax equilibrium closer to or further from the ideal equilibrium of P= MC?
Illustrte what is the put premium on a December 25 PHLX pound contract with an exercise price of $1.81.
Draw an "aggregate supply-aggregate demand" diagram that shows an economy suffering from high levels of unemployment. Show the effects of the following events on the Aggregate Demand curve.
A Monopolist is deciding how to allocate output between two markets. The two markets are separated geographically. Demand and marginal revenue for the two markets are given by:
Assume that James owns a wheat farm that produces an annual crop of 500 bushels. His only choice is to store it in a nearby grain elevator owned by Martin, whose facility will be empty unless James is using it.
What is the difference between gross domestic product and gross national product (GNP)? What is the difference in what GDP measures compared to GNP?
Draw a graph of the aggregate production function with capital, K, on the horizontal axis. Why does it have the shape that you have drawn?
Now suppose the U.S. government wants to buy enough wheat to raise the price to $3.50 per bushel. With the drop in export demand, how much wheat would the government have to buy? What would be the cost to government?
Is he or she maximizing satisfaction? If not, what should the individual do to increase total satisfaction? On the basis of this information, can you pick an optimum combination? Why or why not?
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