--%>
Assignment Help - homework help

Problem on cross-price elasticity

Kathy purchases two goods, t-shirts and caps.  Her demand for t-shirts is:

Qt = 44 – 3Pt - Pc + .04I

The price of caps is Pc = $2. And her income is I = $300.

a. Graph a demand curve for Kathy’s t-shirts.

b. Determine the number of t-shirts will Kathy buy if the price of t-shirts is Pt = $5?

c. Determine the number of caps will she buy at such prices and her present income? 

d. An increase in the price of caps will outcome in (circle one):

  • Kathy’s demand for t-shirts will shift out away from the origin
  • Kathy’s demand for t-shirts will shift in towards the origin
  • Kathy will move down along her demand curve for t-shirts
  • Can’t tell; it depends on whether or not caps are a normal good to Kathy

e.Determine the cross-price elasticity of the demand for t-shirts with respect to the price of caps?

f. Are caps and t-shirts complements or substitutes? And how do you know?

   Related Questions in Microeconomics

  • Q : Selling of physically indistinguishable

    While physically indistinguishable units of a good are concurrently sold at various prices at various locations, such price differentials reflect: (1) differences within marketing and advertising costs. (2) rational ignorance by consumers. (3) differe

    		•
  • Q : Economies of Scale problem Can someone

    Can someone please help me in finding out the accurate answer from the following question. When average production costs reduce as the total production of a firm rises, the firm is experiencing: (i) Economies of the scale. (ii) Economies of scope. (iii) Diseconomies o

    		•
  • Q : Strategy of lowering then high price in

    Juan, Celia, Cassie and Gupta operated rival gas stations at 4 corners of an intersection. Every one originally charged similar price for their gasoline but after Gupta slashed his prices, Juan and Celia as well as Cassie all shut down. Gupta in that case boosted pric

    		•
  • Q : Equilibrium of a commodity What takes

    What takes place to equilibrium of a commodity when there is a decrease in its demand and increase in its supply? Answer: The equilibrium price will reduce.

    		•
  • Q : Problem on unionized construction

    The passage of a significantly higher legal minimum wage would be most probable to advantage: (1) College professors. (2) American high-school dropouts in their teens. (3) Philosophy majors. (4) Unionized construction workers. (5) Foreign workers whose production is e

    		•
  • Q : Illustration of a natural monopoly Of

    Of the given firms, the best illustration of a natural monopoly is: (i) Dell, the largest seller of personal computers. (ii) Toyota, i.e., the huge car company in the world. (iii) OPEC, i.e., the international oil cartel. (iv) Google that dominates th

    		•
  • Q : Close down a purely competitive firm in

    Within the short run, there a purely competitive firm will close down its plant(s) and manufacture nothing when: (i) this makes no pure economic profits. (ii) normal profits were unattainable. (iii) P < ATC at all output levels. (iv) accounting pro

    		•
  • Q : Commercial introduction of production

    Innovation: (w) entails financial investment to create human capital. (x) comprises the commercial introduction of a new product or production process. (y) can reasonably describe only normal accounting profit. (z) was used by John Maynard Keynes to d

    		•
  • Q : Average variable costs and average

    Both average variable costs and average total costs are demonstrated for this profit-maximizing firm, therefore this given figure depicts information for: (i) an oligopoly firm. (ii) operations in the short run since fixed costs are present, although

    		•
  • Q : Why indifference curve is convex Why

    Why the indifference curve is convex to origin?

    		•