ECON 545 Week 4 Midterm Exam/(Correct Q and A)

There is a decrease in the cost of labor for producing bicycles. What happens to bicycle supply? What happens to bicycle demand? 2. Question : (TCO A) Ceteris paribus, Brand A Plain potato chips and Brand B Plain potato chips are substitutes in consumption. The price of Brand A Plain potato chips increases. a. What happens to the demand for Brand B Plain potato chips? b. What happens to the demand for Brand A Plain potato chips? 3. Question : (TCO A) The number of new home sellers in a given market decreases. What happens to the supply of new homes? What happens to the demand for new homes? 4. Question : TCO A) A market is in equilibrium with equilibrium quantity MEQ and equilibrium price MEP. a. What happens to Market Equilibrium Quantity (MEQ) if there is an increase in supply? b. What happens to Market Equilibrium Price (MEP) if there is a decrease in supply and a decrease in demand? c. What happens to MEP if there is an increase in demand followed by a decrease in supply followed by another increase in demand? 5. Question : The following table shows part of the demand function for tickets to an outdoor summer concert by a popular singing group: Price (P)…Quantity (Q) 50……….. 100 35………. 180 20…………300 10…………500 a. What is demand elasticity in the $10 – $20 price range? Is demand elastic, inelastic, or of unitary elasticity? Calculate the value and show all of your work. Be sure to use the midpoint equation used to determine elasticity. b. Assume demand elasticity is 1.3 in the $35 – $50 price range. In this range of demand, by what percentage would quantity demanded change if price increases by 9 percent? Show your detailed calculations. c.What is the effect of a price decline from $35 to $20 on total revenue for the event? Does total revenue (TR) increase, decrease, or remain the same? By how much? Show your detailed calculations. Show Less