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2.a. When the price of café lattes rises from R15 to R20, the quantity demanded decreases from 2000 to 1200 café lattes per day. What is the price elasticity of demand for café lattes (using the arc formula)? (5 marks).
A perfect competitive industry faces a demand curve represented by Q = 25,000 – 1000P.
Also suppose that an individual firm belonging to that industry faces a total cost function given by TC (q) = 40q – q2 + 0.01q3 Here q represents quantity of output produced by an individual firm, Q is the total industry output and P is the price. What would be the equilibrium market price? How much does each firm produce in equilibrium? and also find how many firms would be there in the industry in the long run?
The cost of sunflower seeds has increased. Sunflower seeds are an input when sunflowers are produced. Explain verbally how this change will affect the market for sunflowers, You are allowed to use a diagram to explain your answer,
merchandise exports= 82.1, merchandise imports= 128.7, invisibles= 29.9, services= 18.7, transfers= 17.0, income[net]= -5.8, capital accounts= 4.8, errors= -0.3. calculate trade balance
The population in the country C descreases, due to a lower birth rate. At the same time, there is an increase in the cost of fertilizer which is used to grow vegetables. Explain how the market for vegetables will be affected by the changes. Explain how the equilibrium price and equilibrium quantity will be affected by these changes
Identify the decision made using by proton could reduce the cost of production .
A rise in the price of coffee milkshakes from R6 to R10 results in an increase in quantity supplied from 6 000 to 12 000 units. This means that the arc price elasticity of supply for coffee milkshakes is.
Identify the decision made using by Honda could reduce the cost of production .
Nestle Frozen Yogurt shops have enjoyed rapid growth in Karachi in recent years. From the analysis of Nestle various outlets, it was found that the demand curve follows this pattern.
Q= 200 – 100P + 120i + 32T -250 Ac + 400 AN
Where
Q= Number of cups served per week
P= Average price paid for each cup
i= Per capita income in the given market (thousands)
T= Average outdoor temperature
Ac= Competition’s monthly advertising expenditures (thousands)
AN = Nestle own monthly advertising expenditure (thousands)
8. Elasticity problems:
a. The world demand for crude oil is estimated to
have a short-run price elasticity of 0.05. If the
initial price of oil were $100 per barrel, what
would be the effect on oil price and quantity of
an embargo that curbed world oil supply by 5 per-
cent? (For this problem, assume that the oil-supply
curve is completely inelastic.)
b. To show that elasticities are independent of units,
refer to Table 3-1. Calculate the elasticities between
each demand pair. Change the price units from
dollars to pennies; change the quantity units from
millions of boxes to tons, using the conversion fac-
tor of 10,000 boxes to 1 ton. Then recalculate the
elasticities in the fi rst two rows. Explain why you
get the same answer.
