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Eco3_examI - d What quantity of coffee will be sold at the...

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Eco 3 Fall 2007 Name: Exam I 1. Better-than-average weather brings a bumper tomato crop. The price of tomatoes falls from $7 to $5 a basket, and the quantity demanded increases from 300 to 500 baskets a day. Over this price range, a. What is the price elasticity of demand? 2. The figure shows the demand for pens. a. Calculate the elasticity of demand for a rise in price from $2 to $4. b. At what prices is the elasticity of demand equal to 1, greater than 1, and less than 1? 1
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3. If the quantity of fish demanded decreases by 5 percent when the price of fish rises by 10 percent, is the demand for fish elastic, inelastic, or unit elastic? 4. The table gives the demand schedule for coffee. Price Quantity demanded (dollars per pound) (millions of pounds per year) 10 30 15 25 20 20 25 15 a. What happens to total revenue if the price of coffee rises from $10 to $20 per pound? b. What happens to total revenue if the price rises to $15 to $25 per pound? c. What is the price when total revenue at a maximum?
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Unformatted text preview: d. What quantity of coffee will be sold at the price that answers (c)? e. At an average price of $15 a pound, is the demand for coffee elastic or inelastic? Use the total revenue test to answer this question. 2 5. In problem 4, at $15 a pound, is the demand for coffee elastic or inelastic? Use the total revenue test to answer this question. 6. If a 5 percent fall in the price of beef increases the quantity of beef demanded by 20 percent and decreases the quantity of chicken demanded by 15 percent, calculate the cross elasticity of demand between beef and chicken. Are they complement or substitutes? 7. Judy’s income has increased from $10,000 to $12,000. Judy increased her demand for concert tickets by 10 percent and decreased her demand for bus rides by 5 percent. Calculate Judy’s income elasticity of demand for (a) concert tickets and (b) bus rides. Are these goods normal – luxury or necessity- or inferior? 3...
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