# Supply - demand and elasticity

The demand for good X has been estimated to be ln Qxd = 100 − 2.5 ln PX + 4 ln PY + ln M. The income elasticity of good X is:

4.0.

1.0.

2.0.

−2.5.

What is the value of a preferred stock that pays a perpetual dividend of $150 at the end of each year when the interest rate is 3 percent?

Instruction: Round your response to the nearest dollar.

You've recently learned that the company where you work is being sold for $380,000. The company's income statement indicates current profits of $15,000, which have yet to be paid out as dividends. Assuming the company will remain a "going concern" indefinitely and that the interest rate will remain constant at 6 percent, at what constant rate does the owner believe that profits will grow?

Instruction: Round your response to 2 decimal places.

The supply curve for product X is given by QXS = -460 + 20PX .

a. Find the inverse supply curve.

P=___________+____________Q

b. How much surplus do producers receive when Qx = 380? When Qx = 1,120?

When QX = 380

When QX = 1,120

Suppose the cross-price elasticity of demand between goods X and Y is 5. How much would the price of good Y have to change in order to change the consumption of good X by 40 percent?

If Starbucks's marketing department estimates the income elasticity of demand for its coffee to be 1.7, how will the prospect of an economic boom (expected to increase consumers' incomes by 4 percent over the next year) impact the quantity of coffee Starbucks expects to sell?

Instruction: Round your response to 2 decimal places.

https://brainmass.com/economics/principles-of-mathematical-economics/580670

#### Solution Preview

See the attached file. Thanks

The demand for good X has been estimated to be ln Qxd = 100 − 2.5 ln PX + 4 ln PY + ln M. The income elasticity of good X is:

4.0.

1.0.

2.0.

−2.5.

Income elasticity is the coefficient of Income in the equation. ln Qxd = 100 − 2.5 ln PX + 4 ln PY + ln M

Answer: 1.0

What is the value of a preferred stock that pays a perpetual dividend of $150 at the end of each year when the interest rate is 3 percent?

Instruction: Round your response to the nearest dollar.

Value of a preferred stock = Dividend payment / interest rate = $150/3%= ...

#### Solution Summary

Solves 7 small problems about demand- supply and elasticity. Can be used as a good practice.

Supply/demand analysis and elasticity of demand

What kinds of changes in underlying conditions can cause the supply and demand curves to shift? Give examples and explain the direction in which the curves shift.

What is price elasticity? Give examples of five products whose demand is price elastic, and five products whose demand is price inelastic and elaborate on the choices you make.

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