1 Which of the following will have positive signs and which will have negative ones? (a) price elasticity of demand; (b) income elasticity of demand (normal good); (c) income elasticity of demand (inferior good).Economics - Questions 4
2. Is the demand for oil elastic or inelastic? Give reasons for your answer. Why is the price of oil so high at present on world markets?
What implications will a recovery in the international economy have for the price of oil?
3. How might a firm set about making the demand for its brand less elastic?
4. Assuming that a firm faces an inelastic demand and wants to increase its total revenue, in what direction should it change its price? Is there any limit to which it should go on changing its price in this direction?
5. If the euro becomes stronger against the dollar and sterling what implications is this likely to have on Irish exports?
6. Price (€ per kilo) 4.00 3.50 3.00 2.50 2.00 1.50 1.00
Qd (000 kilos) 30 35 40 45 50 55 60
Qs (000 kilos) 80 68 62 55 50 45 38Assume that the (weekly) market demand and supply of tomatoes are given by the figures shown above:
(a) What are the equilibrium price and quantity?
(b) What will be the effect of the government fixing a minimum price of (i) €3.00 per kilo; (ii) €1.50 per kilo?
(c) Suppose that the government paid tomato producers a subsidy of €1.00 per kilo, (i) Give the new supply schedule, (ii) What will be the new equilibrium price? (iii) How much will this cost the government?
(d) Alternatively, suppose that the government guaranteed tomato producers a price of €2.50 per kilo, (i) How many tomatoes would it have to buy in order to ensure that all the tomatoes produced were sold? (ii) How much would this cost the government?
(e) Alternatively, suppose it bought all the tomatoes produced at €2.50. (i) At what single price would it have to sell them in order to dispose of the lot? (ii) What would be the net cost of this course of action?