Question 1

Microeconomics Exam Two Show your work and/or explain all your answer! 1. (28 points) . a. Suppose that when the price of pancakes increases by 8% the quantity demanded of pancakes falls by 10%. What is the price elasticity of demand for pancakes? Does demand for pancakes appear to be elastic or inelastic? :b. Based on your answer to part a, will the revenue of pancake sellers increase, decrease, or stay the same when the price of pancakes is increased? 0. Which good is likely to have more elastic demand: pancakes in general, or Black- Diamond Hackleback Caviar (a specic brand of caviar). Briey explain your answer. d. Suppose that when the price of French Toast falls by 4% the quantity demanded of pancakes falls by 2%. What is the cross-price elasticity of demand for pancakes with respect to French Toast, and what does your answer tell us about the relationship between pancakes and French Toast? e. Suppose that when the price of pancakes rises by 8%, the quantity demanded of maple syrup falls by 3%. What is the cross-price elasticity of maple syrup with respect to pancakes, and what does your answer tell us about the relationship between pancakes and maple syrup? f. Suppose that when incomes fall by 5% the quantity demanded of pancakes falls by 7%. What is the income elasticity if demand. for pancakes, and what does your answer tell us about how consumers I view pancakes? That is, according to this data, what type of good are pancakes