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Homework answers / question archive / 1)Not yet answered Points out of 1 Tag question Suppose at a recent Japanese film festival rational cinephile Laura faced a choice: see Ikiru, tickets to which cost $6, or see Tokyo Story, tickets to which cost $8
1)Not yet answered Points out of 1 Tag question Suppose at a recent Japanese film festival rational cinephile Laura faced a choice: see Ikiru, tickets to which cost $6, or see Tokyo Story, tickets to which cost $8. Suppose further that Laura chose to see Tokyo Story. Answer true or false to the following statement. Laura's expected pleasure from seeing Tokyo Story could have been equal to her expected pleasure from seeing Ikiru. Select one: A. True B. False
2)Module 1- Assignment-Fall 2020 - Protected View - Saved to this PC References Mailings Review View Help ain viruses. Unless you need to edit, it's safer to stay in Protected View Search Enable Editing 17- A decrease in supply a) Encourages consumers to consume more. b) Encourages consumers to consume less. c) Only affects the behavior of producers. d) None of the above. 18-A 10 percent increase in the price of Pepsi, decreased its quantity demanded by 40 percent. Price elasticity of demand is: a)-1/4 b) 4 c) 4 d) 1/4 e) None. 19. Consider the following demand curve. Assume that the price elasticity of demand at point Eis-2. Which of the following is correct? a) Demand is elastic at point A and inelastic at point B. b) Demand is elastic at point B and inelastic at point A. c) Demand is elastic and point A but we cannot make any conclusion about point B. d) Demand is inelastic at point A but we cannot make any conclusion about point B.
3)With unitary elasticity of demand,
Percentage increase in price reduces quantity by equal percentage so that total revenue is constant
Percentage increase in price leaves quantity demanded unchanged so that total revenue is constant
Percentage increase in price reduces quantity demanded by 1 % so that change in total revenue can increase or reduce
1)This statement is false.
If a buyer or consumer is rational they will like to spend their limited income wisely and draw the maximum utility from it . In the given case we are told that Laura is rational and she has choice of selecting between 2 movies , one is priced at $6 and other at $8. The fact that she has selected movie with higher price indicates that her utility from higher priced movie is higher then the lower priced movie. So this statement is false.
2)
Ans 1.
A decrease in supply leads to a shortage where demand exceeds supply. The shortage raises prices which discourages consumers from buying more. So, the correct answer is option B - encourages consumers to consume less.
Ans 2.
% Change in pepsi's price = 10 and % Change in pepsi's demand = 40 (given)
So, Price elasticity = 40/10 (the negative sign only denotes the inverse relationship between price and quantity demanded and can be ignored)
or Price elasticity = 4
Hence, the right answer is option C. Since price elasticity is more than 1, the demand is elastic.
Ans 3.
As we move along the curve, the elasticity tends to decline. At the top of the curve, where price is high and quantity demanded is low, elasticity is high - consumers are sensitive to price. And as we move along the curve, say at point B, where price is low and quantity demanded is high, the elasticity is less - consumers are insensitive to price.
In the given question, elasticity at point E is -2 or simply 2 (negative sign only denotes the inverse relationship between price and quantity demanded). Following the explanation above, it can be inferred that at all points above point E, price elasticity is more than 2 and at all points below point E, price elasticity is less than 2. So, it can easily be noted that demand is elastic at point A and inelastic at point B. The correct answer is option A. please see the attached file for the complet solution.
3)
ANSWER = option B
Unitary elastic demand is defined as the percentage change in quantity demanded is equal to the percentage change in price. Ed = chnage in quantity demanded / change in price
Example- A 15% rise in price leads to 15% fall in demand for that good. Ed = 15/15 = 1
So the price change does not change or alter the total revenue. as 15 % price rise, reduces the quantity demaned by 15% and the total revenue remains constant.
total revenue = price * number of goods sold.
