Problem Set # 1 - Micro Online - Dunbar, p. Problem Set #1 - Micro Online - Dunbar, p. 6 c) Event 3: Consumers expect Samsung to drop the price of their smartphones next month (1) Which Samsung phone market curve shifts? 4. (5 points) Please answer each of the following multiple choice questions by Which direction? (2) Explanation of your reasoning. HIGHLIGHTING OR BOLDING the response that best answers the question. 1. Tony's "Rugs-R-Us" Toupee shop sells hairpieces for balding men. Tony knows that a (3) On your own piece of paper, graph the effect of this change on the market for Samsung phones (no need to draw this electronically) 5% increase in the price of his hairpieces will result in a 20% decrease in the number of hairpieces sold. The price elasticity of demand (pEd) facing Tony's business equals Price indicating an per Marketfor Samsung Phones 0.25; inelastic demand ed . phone b. 0.25; elastic demand Supply 4.0; inelastic demand 4.0; elastic demand Po A recent study at a liberal arts college concluded that the price elasticity of demand (PEd) is 1.2 for college courses at their institution. The administration is considering a Demand tuition increase to help balance the budget. An economist might advise the school to a decrease tuition in order to increase revenue since demand is elastic. # of Samsung decrease tuition in order to increase revenue since demand is inelastic. Phones increase tuition in order to increase revenue since demand is elastic. (4) As a result of this change, the equilibrium price will (increase/decrease) and the increase tuition in order to increase revenue since demand is inelastic. new equilibrium quantity will (increase/decrease) 3. Put the following products in order from the most elastic to the least elastic demand: food, beer, Leinie's Red Lager beer, Leinie's Red Lager beer served at Moe's Tavern. d) Event 4: The cost of cobalt (a key input in the lithium batteries used in smartphones) a. (1) Leinie's Red Lager beer served at Moe's Tavern, (2) beer, (3) Leinie's Red Lager beer, decreases. (4) food (1) Which Samsung phone market curve shifts? Which direction? ( 1 ) beer, (2) food, (3) Leinie's Red Lager beer, (4) Leinie's Red Lager beer served at (2) Explanation of your reasoning. Moe's Tavern (1) Leinie's Red Lager beer served at Moe's Tavern, (2) Leinie's Red Lager beer, (3) On your own piece of paper, graph the effect of this change on the market for (3) beer, (4) food Samsung phones (no need to draw this electronically). (1) food, (2) Leinie's Red Lager beer, (3) Leinie's Red Lager beer served at Moe's Tavern, (4) beer Price per Marketfor Samsung Phones Samsung phone Supply (Hint: It would be helpful to draw this one before answering ) If the supply curve is perfectly inelastic, then an increase in demand will: increase both the price and the quantity exchanged. increase the price but result in no change in the quantity exchanged. increase the quantity exchanged but result in no change in the price. decrease the price but not change the quantity exchanged. Demand Which of the following pairs of goods would most likely exhibit a cross-price elasticity # of Samsung of demand (xREd) of - 2.5? Phones orange juice and grapefruit juice (substitutes) (4) As a result of this change, the equilibrium price will (increase/decrease) and bagels and cream cheese (complements) the new equilibrium quantity will (increase/decrease) both of the above. none of the above