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Practice_Problems_02 - positive(implying Guinness is a...

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Notes 02: Answers to Practice Problems 1. E) (B) and (C) are true by the first law of demand, but (A) depends on the price elasticity of demand for oranges. 2. E) (B) and (C) would both cause an increase in demand for coffee. A decrease in the price of coffee would cause a movement along the demand curve, or equivalently a change in the quantity of coffee demanded. 3. D) (A) is true by the first law of demand. (B) and (C) are true statements about demand and complements/substitutes. 4. False) The first law of demand says quantity demanded falls when price rises, but the amount spent depends on the price elasticity of demand. 5. B) The price elasticity is the ratio of percent change in quantity to percent change in price 5%/10%= 0.5. 6. B) A rise in income shifts demand up for Guinness beer since the income elasticity is
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Unformatted text preview: positive (implying Guinness is a normal good). The percent increase, x, is found by solving x%/10%=0.8. 7. C) The area under the demand curve to the left of the equilibrium quantity is the sum of the marginal values for the first, second, third, etc, up to the Qth unit purchased. This is the total value of the Q units. 8. E) The three demand ceteris paribus conditions are income, price of related goods, and tastes or anything else that can affect the location of the demand curve. 9. C) Demanders or consumers are concerned about maximizing consumer surplus. 10. C) The price elasticity is ‐ 40%/20%= ‐ 2.0. 11. D) Solve for x in ‐ 1.0=x%/5%....
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