Question

#1: If an increase in the supply of fish causes a huge decrease in the price of fish, we can assume...

A. nothing useful.
B. that total revenue fell for fish suppliers.
C. that demand is very elastic.
D. that demand is very inelastic.
E. that demand is unit elastic.

***not sure!! @jim_thompson5910

Answer 1

#2: Find the price elasticity of demand using the midpoint formula: P1= $8, Q1 = 500, and when P2 = $12, Q2 = 300.

A. 5/4
B. 4/5
C. 0.8
D. 2
E. 0.5

***eek :(

#3: If a moderate increase in the demand for tulip bulbs results in a huge increase in the price of tulip bulbs, we can assume...

A. the supply is very inelastic.
B. the supply is very elastic.
C. suppliers had a lot of time to respond to the increase in demand.
D. suppliers are very sensitive to changes in price.
E. nothing useful.

***ahhhhhh :(

#4: Which of the following is correct?

A. If two goods are complements, their cross-price elasticity of demand is positive.
B. If two goods are substitutes, their cross-price elasticity of demand is negative.
C. If two goods are complements, their cross-price elasticity of demand is negative.
D. If two goods are substitutes, their cross-price elasticity of demand remains the same.
E. If two goods are complements, their cross-price elasticity of demand is negative, and if two goods are substitutes, their cross-price elasticity of demand is positive.

***confused iheartfood :(

#5: If Mary’s total utility from a movie is 10 utils, and Nancy’s total utility from the same movie is 12 utils:

A. Nancy clearly enjoyed the movie more than Mary.
B. Mary enjoyed the movie almost as much as Nancy.
C. Mary enjoyed the movie more than Nancy.
D. we can assume nothing about their relative enjoyment.
E. Nancy clearly enjoyed the movie more than Mary, and Mary enjoyed the movie almost as much as Nancy.

***econ is not my friend hahaa

@jim_thompson5910 :D

Answer 2

for #4, read this article

https://www.boundless.com/economics/textbooks/boundless-economics-textbook/elasticity-and-its-implications-6/other-demand-elasticities-55/cross-price-elasticity-of-demand-212-12303/

Answer 3

okie! :)

so the answer for #4 is C? If two goods are complements, their cross-price elasticity of demand is negative.

gathered this from this part "If two products are complements, an increase in demand for one is accompanied by an increase in the quantity demanded of the other. For example, an increase in demand for cars will lead to an increase in demand for fuel. If the price of the complement falls, the quantity demanded of the other good will increase. The value of the cross-price elasticity for complementary goods will thus be negative."

is that correct?

Answer 4

4C looks good

Answer 5

for #2, read this article

http://economicsonlinetutor.com/elasticitymidpoint.html

Answer 6

the formula given on that page is

p.e.d. = [(Q2 - Q1) / ((Q1 + Q2) / 2)] / [(P2 - P1) / ((P1 + P2) / 2)]

Answer 7

a somewhat nicer way to write it

[(Q2 - Q1) / ((Q1 + Q2) / 2)]
------------------------
[(P2 - P1) / ((P1 + P2) / 2)]

Answer 8

notice how we have (Q2-Q1) over (Q1 + Q2) / 2 in the numerator

the same thing happens with P

Answer 9

yes:)

okay so we end up getting (-200/400)/(4/10)= (-1/2) / (2/5) = -1.25 ?

Answer 10

did i do that right? :O

Answer 11

one sec while I check

Answer 12

oh wait no... that's not even an answer choice! :/

Answer 13

i did something wrong :/

Answer 14

there's a typo in your answer choices

Answer 15

so we have it like this?
[(Q2 - Q1) / ((Q1 + Q2) / 2)]
------------------------
[(P2 - P1) / ((P1 + P2) / 2)]

Q2-Q1=300-500= -200
Q1+Q2=500+300=800
^^800/2 = 400

so the top part comes to -200/400 = -1/2 ?

and then bottom part now
P2-P1=12-8 =4
P1+P2=20
^^20/2 =10

so (-1/2) / (4/10) = -1.25

wait what? so i did it right? :/

Answer 16

it is equal to -1.25 ?

Answer 17

and what i wrote above are the correct steps?

Answer 18

if so, maybe it must be positive? so 5/4 would be the answer? :/

Answer 19

yeah it should be -5/4

Answer 20

ahh okay i'll show my teacher the work on monday then :) but yay!! so i did the steps right! woooo:D

Answer 21

PED (price elasticity of demand) is always negative

price goes up, demand goes down
price goes down, demand goes up

you have this inverse relationship which is why it is negative

Answer 22

ahh okie yay! :)

so what about 1,3,and 5? do you get those? :O

Answer 23

one sec

Answer 24

okie!

Answer 25

ok I know the answer for #1, but idk how to explain it. I wish there was a way to have interactive graphs on here

Answer 26

hmm, let me think

Answer 27

okie:)

Answer 28

and yeah same here! maybe they'll add it sometime in the near future!!

Answer 29

let's say we have this supply and demand curve

Answer 30

then the supply curve S1 shifts to S2

Answer 31

notice how the equilibrium price goes down

Answer 32

what happens if D was more elastic?

Answer 33

yes:)

if it were more elastic, it could change up or down as well right?

Answer 34

but since it's not, it just stays the same?

Answer 35

would it be more steep? or more flat?

Answer 36

more steep right?

Answer 37

more flat actually

Answer 38

D1 is more elastic than D

Answer 39

aw really? darn:( ahh mixing them up a bit! oops!

and okay i see:)

Answer 40

now notice how the price differences are so small on D1 than for D

Answer 41

yes:) but the change is big though!

Answer 42

but if we had D2 being some very inelastic curve

Answer 43

then this means that the more INelastic the demand is, the greater the price change

Answer 44

the supply curve only changes from S1 to S2

assume both have the same elasticity

Answer 45

ahh okay:) so for my problem #1, that means that it will be the demand is very inelastic? because of the huge drop in price?

Answer 46

correct

Answer 47

ahh okay yay!! wow that made a lot of sense hehe thank you!!!!

woo!! so what about 3 and 5? :/