1. It McDonald's launches a successful ad campaign tor Big Macs, what will happen to Big Mac demand? Draw a graph to show this effect. What other determinants for demand are there? 2. Mabel Crantcrd eats only syrup with pancakes. a. What is the technical name for this relationship between syrup and pancakes? b. Suppose the price of pancakes goes up. i. Represent the eect 01 this price increase on Mabel's pancake demand curve. ii. Represent the effect of this price increase on Mabel's syrup demand curve. c. What can we say about the crossrprice elasticity between syrup and pancakes for Mabel Craniord? 3. Based on the following graph, estimate the own-price elasticity between pointsA and B and the own-price elasticity between points 8 and C. Are they elastic or inelastic? Why are the elasticities dierent? To increase revenue, at least in the short run, would you recommend a price increase or a price decrease? P 4. The Dixie Chicken currently sells 3,000 burger platters per month for $1 and the ownprice elasticity for this platter has been estimated to be 1.3. It Dixie Chicken raises prices by T0 cents, how many platters will be sold? 5. Calculate the income elasticity from the following graph between pcintsA and B and between points .3 and C. Define as specifically as possible the type of good represented by each income elasticity. .u' 6. The cross-price elasticity for hamburger demand with respect to the price of hamburger buns is 0.6. If the price of hamburger buns rises by 5%, ceteris paribus, what change will occur for hamburger consumption? What is the relationship of these goods? Why? '1'. Assume that a retailer sells 1,000 six-packs of Pepsi per day at a price of $3Isix-pack_ You, as an economic analyst, estimate that the cross- price elasticity between Pepsi and Coca-Cola is 0.4. If the retailer raises the price of Coca-Cola by 10%, how would sales of Pepsi be affected, ceteris paribus? Why? 8. You read in the Bryan-College Station Eagle that Texas AEM expects the price of tuition to rise by 3% for this coming fall semester. Texas Adah! also expects the number of admission applications to drop by 2% because of this tuition hike. Assuming all other factors held constant, you conclude that the own-price elasticity of demand for applications to Texas MM is equal to 9. The concept of price elasticity of demand was originated by )r questions 10 through 15, circle the correct answer. 10. Suppose that the ownprice elasticity tor Schweppes ginger ale is 1.25. In order for Cadbury Schweppes to increase total revenue, at least in the short run, it would be advisable to a. do nothing. b. lowerthe price 0! the ginger ale. c. raise the price of the ginger ale. d. can't tell; insuicient information. 11. Generally speaking, which 01 the tollowing is true? a. The own-price elasticity at the retail level of the marketing channel is greater than the own-price elasticity at the farm level. b. The greater the number of substitutes of a commodity, the greater the ownprice elasticity. c. The ownprice elasticity is more inelastic in the short run than in the long run. d. All 01 the above. 12. If the own-price elasticity is equal to O.8, then a. a 1% change in quantity demanded gives rise to a G.8% change in price. b. a 10% increase in price gives rise to an 8% decrease in quantity demanded. c. a 1% increase in price leads to an 8% decrease in quantity demanded. d. none 01 the above. 13. If the ownprice elasticity for a good is 1, then the demand for the good is said to be a. elastic. b. inelastic. c. unitary elastic. (1. none of the above. 14. Assume that a retailer sells 1,000 six-packs of Pepsi per day at a price of $3fsix-pack You, as an economic analyst, estimate that the cross- prioe elasticity between Pepsi and CocaCola is 0.6. If the retailer raises the price of CocaCola by 5%, how would sales of Pepsi be affected, ceten's pan'bus? a. Sales of Pepsi would rise by 3 units. b. Sales of Pepsi would rise by 30 units. c. Sales of Pepsi would fall by 30 units. d. None of the above. 15. From question 14, we may conclude that a. Pepsi and CocaCola are complements. b. Pepsi and CocaCola are substitutes. c. Pepsi and CocaCola are independent. (1. can't tell; insufficient information. 16. Consider the following demand function for bananas. Pbananas A $6 B $2 8 12 Qbananas Calculate the own-price elasticity of demand. 17. a. If the cross-price elasticity between two goods is positive, then the goods are b. If the income elasticity for pork is 0.75, then what kind of good is pork? 18. Which of the following combination of goods most closely fits the definition of a complement? Circle the correct answer. a. Bounty towels and Scott towels b. Pepsi and Coca-Cola c. Spaghetti and Spaghetti sauce d. Tide detergent and milk19. Given the cross-price elasticity of 0.6 between Tropicana and Minute Maid orange juice, if the price of Minute Maid were raised from $2.50 to $3.00, ceteris paribus, by how much would the quantity purchased of Tropicana rise? Show all work. 20. Price flexibility is the reciprocal of own-price elasticity. That is, price flexibility relates the percentage change in price due to a 1% change in quantity. If the own-price elasticity of demand equals -0.8, then the price flexibility of demand is equal to ? 21. Using Brandow's estimate of the own-price elasticity for farm products of -0.34, defend the statement that a 1% increase in quantity coming onto the market would depress farm prices by almost 3%. 22. According to Table 5-5 , apples at the retail level have a highly inelastic own-price elasticity of -0.2015. Suppose that a hard freeze in apple-producing areas would lead to a 10% decrease in the quantity of apples. What is the repercussion of this freeze on the price of apples? 23. According to this diagram, the income elasticity of demand for salmon is a. less than 0.5. b. equal to 0.5. c. greater than 0.5. d. can't say; insufficient information. $36,000 $20,000 12 16 Qsalmon