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July 31, 2014

Homework Help: Microeconomics; price elasticity of demand

Posted by Anonymous on Friday, October 3, 2008 at 5:50am.

Please check and correct my answers?
Thank you.

QUESTIONS:

1. The time horizon of the demand curve is one determinant of the price elasticity of demand. Compared to the short-run demand for oil, the demand for oil in the long run will tend to be _____ elastic.


2. Consider the market for peanuts. Initially, the quantity supplied is 500 and at $6.00 each. Then a blight occurs that destroys a significant portion of peanut crops. This shifts the supply curve leftward. The new quantity supplied is now 350 and at $8.00 each. Calculate total revenue in the peanut market before and after the blight. Using the midpoint method, the price elasticity of demand for peanuts between the prices of $6 and $8 per bushel is _____ , which means demand is ______ between these two points.




MY ANSWERS:

1. More elastic in the long run than in the short run because there is more time in the long run of changing the ways an economy uses its resources to satisfy the needs and wants of consumers


2. The total revenue before the blight is $3000 and after the blight is $2800.
The price elasticity of demand for peanuts is 1.24, which means demand is elastic.

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