Question:

(d)

If urban suppliers of water were to raise their prices by 10%, what would be the effect on residential and commercial expenditures?

3.

In 2008, the New York Times Media Group earned revenues of $668 million from circulation, $1.077 billion from advertising, and $181 million from other sources. The Group decided to raise circulation prices and trim less profitable readership. In May 2009, the New York Times planned to raise its weekday cover price from $1.50 to $2. The previous year, the Times had raised the price from $1.25 to $1.50, and circulation fell 3.6% to 1.04 million.

(a)

Using the 2008 price and circulation information, calculate the own-price elasticity of demand for the New York Times weekday edition.

(b)

At the current price of $1.50, and assuming 300 weekdays a year, what is the annual revenue from weekday sales?

(c)

Consider the expected 2009 price increase from $1.50 to $2. What is the percentage change in price?

(d)

Suppose that the expected 2009 price increase from $1.50 to $2 does indeed yield $40 million in incremental revenue. What is the percentage change in revenue?

(e)

Calculate the price elasticity of demand which would imply the $40 million increase in revenue. (Hint: Use equation (3.5).)

(f)

Compare the elasticities in (a) and (e). Does the difference make intuitive sense?

4.

In the US market for four prescription medicines (analgesic/musculoskeletal, antilipidemics, gastrointestinal acid reducers, and insomnia remedies), the elasticity of demand with respect to consumer advertising ranged between 0.13 and 0.19, while the elasticity of demand with respect to physician advertising was 0.51. The own-price elasticity was ?0.67 for drugs advertised to consumers and ?0.73 for drugs not advertised to consumers. (Source: Dhaval Dave and Henry Saffer, "Impact of direct-to-consumer advertising on pharmaceutical prices and demand," Southern Economic Journal, Vol. 79, No. 1, 2012, pp. 97-126.)

(a)

How would a 5% increase in expenditure on advertising to consumers affect the demand for the four prescription medicines?

(b)

What about a 5% increase in expenditure on advertising to physicians?

(c)

Do you expect the same difference between advertising to consumers vis--vis physicians in the demand for over-the-counter (non-prescription) medicines?

(d)

Suppose that a drug manufacturer were to increase advertising. Explain why it should also raise the price of its drugs.

5.

At an Asian mobile service provider, the demand for voice calls had an own-price elasticity of ?0.085 and cross-price elasticity with respect to the price of short message service (SMS) of ?0.078. The demand for SMS had an own-price elasticity of ?0.03 and cross-price elasticity with respect to the price of voice calls of ?0.03. (Source: Youngsoo Kim, Rahul Telang, William B. Vogt, and Ramayya Krishnan, "An empirical analysis of mobile voice service and SMS: A structural model," Management Science, Vol. 56, No. 2, February 2010, pp. 234-252.)

(a)

For which service was the demand more price inelastic?

(b)

How would you describe the relation between the demand for voice calls and for SMS? Are they (i) complements, or (ii) substitutes?

(c)

Which is the relatively stronger complement/substitute? (i) SMS for voice calls, or (ii) voice calls for SMS?

(d)

Describe the impact on revenues from (i) voice and (ii) SMS if the provider were to raise the price of voice calls by 5%

23. What is the crucial difference between inflation generated on the demand side versus inflation generated on the supply side? b . a. Demand-side inflation is short-lived, while supply-side inflation lasts for a long time Demand-side inflation leads to budget surpluses, while supply-side inflation contributes to budget deficits. C. Supply-side inflation is subject to control of policy makers, while demand-side inflation is beyond their reach. d. Demand-side inflation is normally accompanied by rising real GDP, while supply- side inflation may be accompanied by falling real GDP 24. Which of the following could trigger supply-side inflation? a. a decrease in the wage rate for all workers b. an increase in raw materials' prices c, an increase in productivity of capital d. an increase in the labor force 25. At the natural rate of unemployment, the long-run Phillips curve has a(n) a. vertical slope b. horizontal slope. c, upward slope. d. downward slope. D1 Do B Figure 1 Price Level D1 S Do Real GDP Which of the following is true about the economy depicted in Figure 1? a, It is experiencing supply-side inflation. b, Policy makers have chosen to fight inflation rather than unemployment. c, The increase in aggregate demand has increased prices but not real GDP. d, The slope of the aggregate supply curve embodies the trade-off between unemployment and inflation.3. Suppose the demand and supply equations are as follows: QD = 350 - 1/2 Px Qs, = 3Px a. Compute the equilibrium price and quantity and draw the demand and supply curves. b. Compute consumer surplus (CS) and producer surplus (PS) at equilibrium. c. Explain what the values of CS and PS represent.Utilitarianism is: A theory from moral philosophy that argues that an act is right if it serves to maximize the attainment of human satisfaction. OA theory from moral philosophy that argues that profit and financial well-being are important parts of evaluating an ethical situation and should not be ignored or dismissed. A theory from moral philosophy that argues that we should always choose the action that will best benefit us as individuals Question 4 2.5 pts The author, Kelman, analyzes cost-benefit analysis through the lens of ethical theory. He argues for three conclusions. Which of the following IS NOT one of Kelman's conclusions? O In areas of environmental, safety. and health regulation, there may be many instances where a certain decision might be right even though its benefits do not outweigh its costs. Of Given the reasons why it is problematic to monetize non-marketed benefits or costs that is a prerequisite for cost-benefit analysis, it is not justifiable to devote major resources to the generation of data for cost-benefit calculations or to undertake efforts to further promote cost-benefit analysis. Getting decision-makers to make more use of cost-benght techniques is important enough to warrant both the expense required to gather the data for improved cost-benefit estimation and the political efforts needed to give the activity higher priority compared to other activities, (): There are good reasons to oppose efforts to put dollar values on on-marketed benefits and costs,IL Short Answer Questions: 1. What is scarcity and why does it exist? How is scarcity related to the study of economics? 10 points 2. Discuss the three fundamental economic questions that all nations must address. 10 points 3. Draw a supply and demand curve for cars and graphically illustrate the effect of an increase in the price of steel (an input). Label all axes and curves. 10 points 4. Draw a PPF with cars on the x-axis and TV's on the Y axis. Make sure the PPF exhibits increasing opportunity costs. 10 points