Discussion Question 8: If the price increase by 10 percent by how
much does the quantity of household
a) natural gas and
b) electricity change in the short run and the long run? (Hint: use
the price-elasticity values).
Discussion Question 10: Agricultural commodities are known to
have a price-inelastic demand and to be necessities. How can this
information allow us to explain why the income of farmers falls
a) After a good harvest?
b) In relation to the incomes in other sectors of the economy?
Discussion Questions: 11.
Suppose that the cross-price elasticity of demand between McIntosh
and Golden Delicious apples is 0.8 between apples and apple juice is
0.5 between apples and cheese is -0.4 and between apples and beer
is 0.1 what can you say about the relationship between each set of
commodities
Problem 3: Starting with the estimated demand function for
Chevrolets given in Problem 2, assume that the average value of the
independent variables changes to N=225 million, I=12,000,
PF=10,000, PG=100 cents, A=250,000 and PI=0.
a) Find the equation of the new demand curve for Chevrolets.
b) Plot this new demand curve, D’C, and, on the same graph, plot
the demand curve for Chevrolets, DC, found in Problem 2(d).
Problem 7: The total operating revenues of a public transportation
authority are $100 million while its total operating costs are $120
million. The price of a ride is $1, and the price elasticity of demand
for public transportation has been estimated to be -0.4. By law, the