Reference no: EM13183983
Before 2005, economists estimated the cross-price elasticity between fruits and vegetables to be +1.5. Since the introduction in 2005 of the "New Food Pyramid", the revised estimate of the cross-price elasticity between fruits and vegetables is now +0.25. This would imply that, compared to the old estimate of +1.5, an increase in the price of vegetables would now lead to what type of shift in the demand for fruit?
A bigger shift, but in the same direction.
A smaller shift, but in the same direction.
A bigger shift and in the opposite direction.
A smaller shift and in the opposite direction.
In September of this year, devastating floods moved through Colorado and destroyed much of the state's animal feed crops (such as alfalfa and hay). If one wants to estimate the impact of the decrease in the supply of feed crops on the price of feed, then this could best be measured by using the:
Elasticity of demand.
Elasticity of supply.
Income elasticity.
Cross-price elasticity.
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F
The smaller a food product's share is of the consumer budget, the less elastic demand is likely to be.
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F
The fewer substitutes a food product has, the more inelastic demand will be.
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F
If organic food consumers are less price responsive than conventional consumers, then it is likely that the elasticity of demand for organic foods is more elastic than the elasticity of demand for conventional foods.
Assume the following information is known regarding the apple market:
Ideal growing conditions in the apple producing regions of the U.S. this year have led to a significant increase in the apple crop. It is expected that the quantity traded in the market this year will increase by approximately 15%.
The elasticity of demand for apples is -0.64.
The elasticity of supply for apples is +0.48.
The income elasticity of apples is +0.24.
Given the elasticities above, calculate the percentage change in the price of apples due to the bumper crop. For full credit, you must show your work.
Given your answer in (2) above - what will happen to the total revenue of apple producers - will it increase or decrease (circle one)? Explain how you know this.
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What type of shift in the demand for fruit
: Before 2005, economists estimated the cross-price elasticity between fruits and vegetables to be +1.5. Since the introduction in 2005 of the "New Food Pyramid", the revised estimate of the cross-price elasticity between fruits and vegetables is no..
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