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Drought cuts the quantity of wheat grown by 10 percent.

Question : Drought cuts the quantity of wheat grown by 10 percent. : 9644

Drought cuts the quantity of wheat grown by 10 percent. The price elasticity of demand for wheat is 0.5. Calculate the answers below. >>> Answer to 1 decimal place. >>> If your answer is negative, include a minus sign. If your answer is positive, do not include a plus sign. The price of wheat will rise by _____ percent Pasta makers estimate that the change in the price of wheat will increase the price of pasta by 8 percent, and decrease the quantity demanded of pasta by 4 percent. The pasta makers' estimate of the price elasticity of demand for pasta is _____? Pasta sauce makers estimate as a result of the increase in the price of pasta that the quantity of pasta sauce demanded will decrease by 4 percent. The pasta sauce makers' estimate of the cross elasticity of demand for pasta sauce with respect to the price of pasta is __________?

Solution

1.

we knew that,

Price elasticity of demand = (% change in quantity demanded) / (% change in price)

Here, due to drought quantity demanded fall by 10%, and elasticity of demand is 0.5. So,

% change in price = % change in quantity demanded / Price elasticity of demand

% change in price = 10% / 0.5

% change in price = 20%.

So, The price of wheat will rise by 20 percent.

2.

we knew that,

Price elasticity of demand = (% change in quantity demanded) / (% change in price)

Here, change in the price of wheat will increase the price of pasta by 8%, and decrease the quantity demanded of pasta by 4%.

Price elasticity of demand = 4% / 8%

Price elasticity of demand for pasta = 0.5.

So, The pasta makers' estimate of the price elasticity of demand for pasta is 0.5.

3.

we knew that,

Cross price elasticity of demand = (% change in quantity demanded of good A) / (% change in price of good B)

Here, the change in the price of wheat will increase the price of pasta by 8% and the quantity of pasta sauce demanded will decrease by 4%.

So, Cross price elasticity of demand for pasta sauce with respect to the price of pasta = 4% / 8%

Cross price elasticity of demand for pasta sauce with respect to the price of pasta = 0.5.

So, The pasta sauce makers' estimate of the cross elasticity of demand for pasta sauce with respect to the price of pasta is 0.5.



 

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