ELASTICITIES II (Applications) |. The supply of maths textbooks is furl price elastic while the demand is fairly price inelastic 8) Explain why this i probably tue 6) The goverment is contemplating introducing a sales tax of 12 Yoon textbooks. Give one possible ‘reason for this move and use the skeleton diagram below to show the incidence ofthe tax P ©) State the rule on the incidence of sles tx using price elasticities (PED and PES). 2h The data below refers to demand! and supply of tablet computers and laptops and income of the average household over time, Year (a) Priceuiis(S) Dues QSaries-—_‘Income($)_ QD, 1 300 5000 12000 © 50000-8000 2 240 8000 9000-55000 7.600 8) Suggest reason for the fl in pice of tablet computers: b)_Isthe market for ablet computers in equilibrium? Explain ©) Caleulate PED for tablet computers (assume constant income). PED 2) Calculate the total revenue/sales for year I and year 2. for tablets TR, TR ©) Did the fll in tablet prices increase or derease total revenue for manufacturers. How could you have predicted his from your pat (c) answer? 1) Caleutate the income lasticity of demand for tablet computers. Assume constant prices yEDoooou0yy — s2uEA ue a5uely pu 02 pase sod ange sang £1983 “soqgH oN ornduia tyge“The demand cure fer pot chips fed bya poucrn the US shown below Pisrma "the company cuts its price per packet from $5 to $4 then 5 ‘otal revenue wil fl Because the demand is price elastic. 4| Bota revenue wi rise hecause the demand spice o clastic, © tral revenue will remain unchanged. > Peta revenue wll rie because demand is price inelastic. Explain - 6 Te catty of demand fr htday resort in th Bahamas ar flows PED=-08 YED~ +16 From the above data we ean deduce that * An increase in income of 10% wil ad wo a increase in demand oF 8%, 5 Holidays othe Bahamas ae price inlsic and hence a noma 00d, © Am nce in th price of sor wil ines the total xem for resort owners, PA -allin income f 10% wil result in ll in demand o 16% fy Bahamas resort. Explain 7 Which ofthe following groups wll obably have the inca Pep for air raver? ‘A business executives B people who are afaid oF fying © students, D retired couples, Explain 8 A-sales tax will all entry onthe consumer ifthe A demand curve is perfectly elastic 1B supply curve is perfectly inelastic © demand and supply curve are both unitary price Done ofthe above Explain ; ; 9, Consumer surplus will be zero if A. Supply is perfeetly elastic B Demand is perfectly clastic © Price elasticity of demand is 1 D_—_ None af the above. Explain OO is more inelastic 10. The price elasticity of supply fora product A. the higher the numberof fim inthe industry the longer she product ean be stored © the longer the time requited to make the product oad 1D the higher the inerchangeabilty between the factors of pt Explain‘apponpaudisyna> Kayod {ave Snasei9 ous OIA BP HEEEA ST eid crag ou, on % say Susan ‘aolioa are a4oge 24 Jo vou PS.OySEG oy yy ogy18 Met ao tntroduces a specific tax per square metre of land, Evaluate the view that fad. 7 7 1. Define market failure 19. Examine the merits ofthe sate givin Journ Who Sn Eng tes ov ince cols wishing tet ply inthe ety 20. Agow 20¥emment decides to ease the minimum w this policy on stakeholders i rage for unskilled workers. Evaluate the effects of Define marginal private cost (MPC). (2) both demand for and supply of workers is wage incastc, (6) both demand for and supply of workers is wage elasti 3, Whit isthe MPC of owning a ear? 4, Define extemal cost (EC) using the example of owning a car. 5, Marginal Social Cost (MSC) a 6. Define marginal private benefit(MPB). Whats the MPB of getting an eye test? benefit (EB) from an eye test? 8. Whatis the extem