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.
1. I agree
2. I agree
no agree
more
I AGree
Less
1. Your answer is incorrect. The time horizon of the demand curve refers to the length of time consumers have to adjust their behavior in response to a change in price. In the short run, consumers may not have enough time to find suitable substitutes or change their consumption patterns, so demand tends to be less elastic. In the long run, consumers have more time to adjust, so demand tends to be more elastic. Therefore, the correct answer is that the demand for oil in the long run will tend to be more elastic.
2. Your total revenue before the blight is incorrect. Total revenue is calculated by multiplying the quantity sold by the price. Before the blight, the quantity sold is 500 and the price is $6.00 per unit, so the total revenue is 500 * $6.00 = $3000.
Total revenue after the blight is also incorrect. The new quantity supplied after the blight is 350, and the new price is $8.00 per unit. So the total revenue after the blight is 350 * $8.00 = $2800.
Your calculation of the price elasticity of demand is correct. To calculate the price elasticity of demand using the midpoint method, you need to use the following formula:
Price elasticity of demand = ((Q2 - Q1) / [(Q2 + Q1) / 2]) / ((P2 - P1) / [(P2 + P1) / 2])
Using the values given, the price elasticity of demand between $6 and $8 per bushel is: ((350 - 500) / [(350 + 500) / 2]) / (($8 - $6) / [($8 + $6) / 2]) = (-150 / [425] / (2 / [7]) = (-0.3529) / (0.2857) = -1.23 (approx.)
The negative sign indicates that demand is elastic, meaning that a change in price has a relatively large impact on quantity demanded.