Table1 is from the usda website examining wheat

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Unformatted text preview: g. Suppose the wage now increases from $5 to $10, while r is still $20. What does your intuition say about new cost minimizing (L, K) at Q=32? In other words, would you increase or decrease L compared to your answer (f)? Would you increase or decrease K compared to your answer (f)? You do not have to calculate. Explain your reasoning. (6 pts) Decrease L and Increase K because the relative price of labor becomes higher than before 2. We discussed in class about the USDA website that compiled the estimation results of various elasticities of demand. Table1 is from the USDA website examining wheat. Table1 Commodity Elasticity information Elasticity Mean Rice cross price 0.143800 Seafood cross price -0.250000 Fruit cross price -0.410000 Wheat Income 0.512970 Wheat own price -0.731340 a. According to Table1, is wheat a necessity or a luxury good? Explain. (6 pts) Income elasticity for wheat is 0.51, which is less than 1. Therefore, it is necessity b. According to Table1, what is (are) the complement(s) to wheat? What is (are) substitute(s)...
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This document was uploaded on 02/06/2014.

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