Attempt all the questions below

1 > Jermaine likes to eat ramen noodles. When his income rose last year by 10%, his consumption of ramen noodles fell by 5%. Therefore, the income elasticity of demand is _________ ( give your answer to two decimals), and for Jermaine, ramen noodles are a(n) inferior good.

2> Anna is a manager at a pizzeria in town, and wants to determine whether the demand for pepperoni pizzas is elastic or inelastic. Over the last several months, she has been adjusting the prices of pepperoni pizza, and has information on sales and total revenue.

When Anna charged $11 per pizza, she sold56 pizzas. When she cut the price to $10,she sold50 pizzas. Since revenue ___________, anna knows that demand is ___________

increased inelastic

decreased elastic

stayed the same unit elastic

3> Assume that Anna wants to charge a price to maximize total revenue. Given your answer above, Anna should _________the price of pizza.

decreased

increased

not change

4>The income elasticity of the demand coefficient isfor inferior goods.

A. greater than zero

B. sometimes greater than zero and sometimes less than zero

C. less than zero

D. equal to zero

5> Ross eats peas and carrots. When the price of carrots fell by 6%, Ross's consumption of peas rose by 5%. Therefore, the cross-price elasticity of demand for peas with carrots is________ (give your answer to two decimals), and for Ross,peas andcarrots are

_____________ goods

unrelated

complements

substitutes

6> If the cross-price elasticity of demand for two goods is positive, the two goods are _______.

A. normal goods

B. substitutes

C. not related

D. complements

7> Determine whether the following scenarios indicate that the supply of the product is relatively elastic or relatively inelastic.

a store that sells a good that cannot be stored easily

food trucks that can quickly relocate

a donut shop runs out of jelly-filled donuts this morning

a golf course that has a limited amount of land to add new holes

oil producers are currently producing 30% below capacity

which one of these is ELASTIC and INELASTIC

8> Your local movie theater earns a total revenue of $40,000 per month when the price of a movie ticket is $8, and it earns a total revenue of $35,000 when the price of a movie ticket is $10.

demand is ________

-elastic

-inelastic

-unitary elastic

9> When your local Internet service provider increased its monthly charge from $40 to $50, the number of subscribers fell from 2,000 to 1,800.

demand is _________

-elastic

-inelastic

-unitary elastic

10> Last month, your local coffee shop charged $4 for a cappuccino and sold 150 cappuccinos. This month, it increased the price of a cappuccino to $5 and is on track to sell 120 cappuccinos.

demand is _______

-elastic

-inelastic

-unitary elastic

11> Sort the items below into two main categories: whether demand for each type of good is relatively elastic or relatively inelastic.

goods that have a large number of available substitutes.

goods that are necessities

goods that are narrowly defined.

goods on which consumers spend a small share of their budget.

which one of these is RELATIVELY ELASTIC and RELATIVELY INELASTIC

12> The table below provides price and output information for Angela's weekly demand curve for cheeseburgers. Use the information in the table to answer the questions below, and give all answers to two decimals.

Price number of cheeseburgers demanded (per week)

(per cheeseburger) 3

$8 5

$6

a. Calculate the price elasticity of demand if the price falls from $8 to $6. Do not use the midpoint formula. _________________

b. Calculate the price elasticity of demand if the price increases from $6 to $8. Do not use the midpoint formula._______________

c. Use the midpoint method to calculate the price elasticity of demand._______________

13>The table below shows the demand schedule for a pint of Sweet Chocolate, a delicious peanut butter chocolate stout:

price quantity demanded

$8 3

$6 5

One of the problems with the basic elasticity formula is that you get different elasticity values depending on whether you assume the price falls from $8 to $6, or whether you assume the price rises from $6 to $8. The question below illustrates how the midpoint formula corrects for this problem. Give all answers to two decimals.

1> Use the point elasticity formula to calculate the price elasticity of demand if the price of a pint falls from $8 to $6:___________

2> Use the point elasticity formula to calculate the price elasticity of demand if the price of a pint rises from $6 to $8: _______________

3> . Using the midpoint method to calculate the price elasticity of demand, the price elasticity of demand is____________

14> A local pizzeria sells 500 large pepperoni pizzas per week at a price of $20 each. Suppose the owner of the pizzeria tells you that the price elasticity of demand for his pizza is -4, and he asks you for advice. He wants to know two things. First, how many pizzas will he sell if he cuts his price by 10%? Second, how will his revenue be affected?

If he cuts his price by 10%, his sales will increase to_____________pizzas, and his total revenue will increase to $_________________

15> Consider the market for coffee. For each of the following scenarios, what would happen to total revenue after the price increases? Place each scenario in the correct category.

coffee drinkers decide to save their money for Friday nights

leaf rust damages one-third of the world's coffee crop.

coffee drinkers discover a flavor of tea that tastes like coffee,

brazil has a drought

coffee drinkers say there is no substitute.

which one of these is INCREASE TOTAL REVENUE DECREASE TOTAL REVENUE CANNOT DETERMINE

16> Southern California home prices rose only a little in June, sales slid

by Andrew Khouri

Southern California home prices rose only 1.2% in June from a year earlier, while sales fell 8.8%, reflecting a broad slowdown in the region's pricey housing market.

The six-county region's median price the point at which half the homes sold for more and half for less clocked in at $541,250 last month, according to a report Friday from CoreLogic.

Although that price is a record, the modest rise indicates buyers aren't willing or able to aggressively bid up homes after years of sharp price increases that have sparked renewed concerns over thelack of affordable housingin the Golden State.

Economists have blamed the lack of affordability for drastically slowing the housing market toward the end of last year and causing the region's median home price to fall slightly in March from a year earlier the first decline since 2012.

"Affordability has gotten to the point where there are just a lot of folks priced out," said Jordan Levine, an economist with the California Assn. of Realtors.

Mortgage interest rates have steadily declined this year, however, which real estate agents say has drawn some people back into the market. This week, the average rate on a 30-year fixed mortgage was 3.75%, down from 4.94% in November, according to Freddie Mac. For a $500,000 mortgage, the change would lower a borrower's monthly payment by $280.

But despite those savings, agents say buyers are still pickier than in years past, when bidding wars were furious and homes flew off the market. In Los Angeles County, the median time on the market last month was 46 days, compared with 36 days a year earlier, according to online brokerage Redfin. Time on the market rose in each of the other five counties in the region as well.

Here is a breakdown of prices and sales in each county:

In Los Angeles County, the median price rose 0.5% to $618,000 in June and sales fell 12.1%.

In Orange County, the median price slipped 0.3% to $738,000 and sales fell 9.4%.

In Riverside County, the median price climbed 5.3% to $399,000 and sales fell 4%.

In San Bernardino County, the median price rose 1.5% to $340,000 and sales fell 11.4%.

In Ventura County, the median price dropped 5.7% to $580,000 and sales rose 1.6%.

In San Diego County, the median price rose 2.6% to $590,000 and sales fell 7.4%.

Although the market has slowed, many economists say a crash in values is unlikely. The economy may not be strong enough to support steep price increases, they say, but a low rate of home building and continued job growth mean enough people will probably be willing to buy a home at, or at least near, today's prices.

The California Assn. of Realtors recently revised its 2019 sales forecast, in large part because of falling mortgage rates. It still predicts the smallest annual price appreciation of the current real estate upswing, but the group now forecasts a 4% gain in the statewide median price for a previously owned single-family home. Before, it was predicting a 0.2% decline.

Richard Green, director of the USC Lusk Center for Real Estate, said today's tight lending standards will provide a barrier against a wave of foreclosures similar to the one last decade that helped crash the market.

Still, Green is more bearish than the Realtors. Citing a mismatch between incomes and prices, he expects the Southern California median to remain flat or perhaps decline 5% over the next two years.

"The main thing," he said, "is that prices are too high."

Assume that no other factors influence the demand or supply of housing. In ____________ County, the law of demand appears to be violated.

orange

riverside

san diego

los Angeles

The price elasticity of demand in Ventura County is__________. Give your answer to two decimals.

Holding the price elasticity of demand constant, sales in Ventura County would change by_________________%, if prices increased by 2%. Give your answer to two decimals.

17> Suppose that demand for automobiles increases by 20% when consumers' incomes increase by 15%. What is the income elasticity of demand for automobiles? Round your answer to two decimal places.______________

18> After graduating from college, you are hired by the Ford automobile company as an economic analyst. For your first project, you are asked to estimate what would happen to the sales of Ford Mustangs as a result of a change in (i) the price of a Chevrolet Camaro, (ii) the price of gasoline, and (iii) consumer incomes. You are given the following elasticities:

Price elasticity of demand for Ford Mustangs = -2.5

Cross-price elasticity between Ford Mustangs and Camaros = 1.5

Cross-price elasticity between Ford Mustangs and gasoline = -0.80

Income elasticity of demand for Ford Mustangs = 3.00

Suppose the price of a Camaro falls by 10%. With all else being equal, sales of Ford Mustangs would ______________ by ____________%

fall / rise

If the price of gasoline increases by 20%, the quantity of Ford Mustangs would _____________ by _________%

fall / rise

If consumer incomes increase by 5%, the quantity of Ford Mustangs would ___________________ by __________%

fall/rise

19> The price of peanut butter increases from $3.00 to $3.50 per jar, and the quantity of jelly demanded falls from 35 jars to 28 jars. Using the midpoint formula, calculate the cross-price elasticity of demand. Report your answer to two decimal places.______________

20> In the following questions, give all your answers to two decimals.

Patrice works as an economist for the Bureau of Labor Statistics (BLS). Her current project is to estimate the effect of changes in income, prices of related goods, and the price of potatoes on the demand for beef. Patrice has the following data:

Price elasticity of demand for beef-0.80

Income elasticity of demand for beef+ 1.40

Cross-price elasticity between beef and chicken+1.20

Cross-price elasticity between beef and potatoes-0.50

Suppose the price of beef falls by5%. All else equal, the quantity of beef demanded would ____________ by ___________%

fall

rise

stay the same

If consumer income falls by 9%, the quantity of beef demanded would _____________________ by __________%

fall

rise

stay the same

If the price of chicken falls by2%, the quantity of beef demanded would _________________ by ____________%

fall

rise

stay the same

If the price of potatoes falls by12%, the quantity of beef demanded would ________________________ by __________%

fall

rise

stay the same

21> Suppose that an employee at a coffee shop is willing to work 30 hours per week when she is paid $12.00 per hour. When she is offered a raise to $16.00 per hour, she is willing to work 40 hours per week.