# Supply - demand and elasticity

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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.

#### Solution Preview

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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.