3. Using the midpoint method The following graph gives two points (A and B) along a hypothetical demand curve for jackfruit. 5. The variety of demand curves The following graph displays four demand curves (PP, QQ, RR, and 55) that intersect at point V. Using the midpoint method, the price elasticity of demand for jackfruit between point A and point B is approximately 'V . This indicates that demand for jackfruit is 'V between points A and B. \f4. Elastic, inelastic, and unit-elastic demand The following graph shows the demand for a good. \fStep 3: Calculate the change in quantity by subtracting the original quantity from the new quantity. Do the same for the change in price. Step 4: Calculate the percentage change in quantity demanded by dividing the change in quantity by the average quantity. Do the same to calculate the percentage change in price. Step 5: Calculate the price elasticity of demand by dividing the percentage change in quantity demanded by the percentage change in price, ignoring the negative sign. Using the midpoint method, the elasticity of demand for headsets is about VFor each of the regions listed in the following table, use the midpoint method to identify if the demand for this good is elastic, (approximately) unit elastic, or inelastic. Region Elastic Inelastic Unit Elastic Between Y and Z O O O Between W and X O O O Between X and Y O O O True or False: The slope of the demand curve is equal to the value of the price elasticity of demand. O True O False6. Elasticity and total revenue The following graph illustrates the weekly demand curve for motorized scooters in Roanoke. Use the green rectangle (triangle symbols) to compute totalr revenue at various prices along the demand curve. Note: You will not be graded on any changes made to this graph. According to the midpoint method, the price elasticity of demand between points A and B is approximately '7 . Suppose the price of scooters is currently $45 per scooter, shown as point B on the initial graph. Because the demand between points A and B is V , a $15-per-scooter increase in price will lead to T in total revenue per week. In general, in order for a price increase to cause a decrease in total revenue, demand must be '7 . Using the graph, complete the table that follows by indicating whether each statement is true or false. Statement True False Curve RR is less elastic between points V and Y than curve QQ is between points \\l and X. O 0 Between points V and 2, curve SS is unit elastic. O O Between points V and Y, curve RR is elastic. O O On the following graph, use the green point (triangle symbol) to plot the weekly total revenue when the market price is $30, $45, $60, $75, $90, $105, and $120 per scooter.10. Price elasticity of supply in the short run and long run The following graph shows the short-run supply curve for pistachios. Place the orange line (square symbol) on the following graph to show the most likely long-run supply curve for pistachios. (Note: Place the points of the line either on M and R or on M and W.)Complete the first column of the following table by computing the cross-price elasticity between splishy splashers and frizzles, and then between splishy splashers and cannies. In the second column, determine if splishy splashers are a complement to or a substitute for each of the goods listed. Finally, complete the final column by indicating which good you should recommend marketing with splishy splashers. Relative to Splishy Splashers Cross-Price Elasticity of Demand Complement or Substitute Recommend Marketing with Splishy Splashers Frizzles CanniesCompute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on the income elasticities, classify each good as either a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign gives important information.) Good Income Elasticity of Demand Normal Good or Inferior Goad Tokens L 1" Kings ; V Queens ; V Which of the following three goods is most likely to be classified as a luxuryr good ? O Tokens 0 Queens 0 Kings 48 -O 40 Long-Run Supply 32 M Short-Run Supply PRICE (Dollars per pound) 24 16 8 0 0 2 4 6 8 10 12 QUANTITY (Thousands of pounds of pistachios)11. Calculating the price elasticity of supply Cho is a volunteer re ghter living in Miami who coaches youth soccer to supplement their normal income. At an hourly wage rate of $20, they are willing to coach 5 hours per week. Upping the wage to $40 per hour, they are willing to coach 14 hours per week. Using the midpoint method, the elasticity of Cho's labor supply between the wages of $20 and $40 per hour is approximately V , which means that Cho's supply of labor over this wage range is V . 13. The variety of supply curves The following graph displays four supply curves (LL, MM, NM, and 00) that intersect at poTnt V. \f12. Elastic and inelastic supply The following graph plots a supply curve for some hypothetical good. For each of the regions, use the midpoint method to identify whether the supply of this good is elastic or inelastic. Region Elastic Inelastic Between X and Y O C) Between V and W O O True or False: As rms reach near maximum capacity at high levels of quantity supplied, supply becomes less elastic because firms may need to invest in additional capital in order to further increase production. 0 True 0 False \fUsing the graph, complete the table that follows by indicating whether each statement is true or false. Statement True False Between points V and W, curve NN is unit elastic. O O Between points V and Y, curve 00 is inelastic. O O Curve 00 is more elastic between points V and Y than curve LL is between points V and X. O O \f7. Using the income elasticity of demand to characterize goods A survey taken by residents from the imaginary town of Cardsburgh tells economists that the following changes result from a 16% rise in income: 0 A 3% increase in the quantity of tokens demanded o A 17% decrease in the quantity of kings demanded o A 34% increase in the quantity of queens demanded 2. Calculating the price elasticity of demand: A stepbystepguide Suppose that during the past year, the price of a virtual reality headset fell from $4,350 to $3,930. During the same time period, consumer sales increased from 386,000 to 487,000 headsets. Calculate the elasticity of demand between these two pricequantity combinations by using the following steps. After each step, complete the relevant part of the table with the appropriate answers. (Note: For decreases in price or quantity, enter values in the Change column with a minus sign.) Original New Average Change Percentage Change Quantitv I | I | | | | | _V Price I S I I 3 I I '5 I I S I V Step 1: Fill in the appropriate values for original quantity, new quantity, original price, and new price. Step 2: Calculate the average quantity by adding the original quantity and the new quantity, and then dividing by two. Do the same for the average price. 40 O Demand 32 Supply Supply 24 PRICE (Dollars per ton) 16 Demand 8 0 16 24 32 40 0 8 QUANTITY (Thousands of tons)14. Application: Demand elasticity and agriculture The following graph illustrates the market for walnuts. It plots the monthly supply of walnuts and the monthly demand for walnuts. Suppose new gathering technology is invented, allowing growers to produce more crops using the same amount of resources. Show the effect this shock has on the market for walnuts by shifting the demand curve, supply curve, or both. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.8. Substitutes, complements, or unrelated? You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: splishy splashers, frizzles, and cannies. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of splishy splashers decreases by 8%, the quantity of frizzles sold increases by 6% and the quantity of cannies sold decreases by 8%. Your job is to use the cross-price elasticity between splishy splashers and the other goods to determine which goods your marketing firm should advertise together.9. Application: Elasticity and hotel rooms The following graph input tool shows the daily demand for hotel rooms at the Lakes Hotel and Casino in Atlantic City, New Jersey. To help the hotel management better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demand factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. Demand Factor Initial Value Average American household income $50,000 per year Roundtrip airfare from Pittsburgh (PIT) to Atlantic City (ACY) $100 per roundtrip Room rate at the Mountaineer Hotel and Casino, which is near the Lakes $250 per night Use the graph input tooi to heip you answer the following questions. You wii:r not be graded on any changes you make to this graph. Several growers are happyr with this advancement in technology because now they can sell more crops, which they believe will lead to increases in revenue. Using elasticities, you will be able to determine whether this price change will lead to a rise or fall in total revenue in this market. Using the midpoint method, the price elasticity of demand for walnuts between the price levels of $20 and $12 per ton is '1" , meaning that betweel these two points, demand is '1" .Thus, you can conclude that the grower's claim is 'IIIr , because total revenue will 7 due to the technological improvement. Confirm your previous conclusion by calculating total revenue in the walnut market before and after the technological improvement. Enter these values in the following table. Before Technological Improvement After Technological Improvement Total Revenue (Thousands of Dollars) :I |:] For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Lakes is charging $150 per room per night. If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Lakes 7 from El rooms per night to Cl rooms per night. Therefore, the income elasticity of demand is V , meaning that hotel rooms at the Lakes are 7 If the price of an airline ticket from PIT to ACY were to increase by 10%, from $100 to $110 roundtrip, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Lakes '7 from C] rooms per night to |:] rooms per night. Because the cross-price elasticity of demand is V , hotel rooms at the Lakes and airline trips between PIT and ACY are V . Lakes is debating decreasing the price of its rooms to $125 per night. Under the initial demand conditions, you can see that this would cause its total revenue to V . Decreasing the price will always have this effect on revenue when Lakes is operating on the '7 portion of its demand curve. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool ? 500 Market for Lakes's Hotel Rooms 450 Price 150 (Dollars per room) 400 Quantity 350 350 Demanded (Hotel rooms per 300 night) 250 PRICE (Dollars per room) 200 Demand Factors 150 Demand Average Income 50 (Thousands of 100 dollars) 50 Airfare from PIT to 100 ACY 0 (Dollars per 0 50 100 150 200 250 300 350 400 450 500 roundtrip) QUANTITY (Hotel rooms) Room Rate at 250 Mountaineer (Dollars per night)