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Quiz 3 Notes (WK3)

# Quiz 3 Notes (WK3) - Quiz 3 Notes(WK3 Inthelongterm,...

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Quiz 3 Notes (WK3) In the long term, we should expect that demand for cigarettes would become  INELASTIC. This is the TIME DIMENSION we read on page 99. We can say that at the P1 to P2 range, demand is ELASTIC – see page 106 figure  5A.2. If price falls for an elastic good, Total Revenue rises – as we see on page 98. We can say that at the P3 to P4 range, demand is INELASTIC – see page 106 figure  5A.2. If price falls for an elastic good, Total Revenue decreases – as we see on page  98. If Jane chooses only clothing and no food, she can have \$500/\$25 = 20 clothing. If she  chooses only food and no clothing, she can have \$500/10 = 50 food. Those are the  points for the budget constraint (20, 50). But, we know that Jane wants a combination of  both. Out of the options listed, only (10,25) combination is feasible.
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