econ help 2. When the price of strawberries fell by 10%, the quantity demanded r
ID: 1220867 • Letter: E
Question
econ help
2. When the price of strawberries fell by 10%, the quantity demanded rose by 15% a. s the demand for strawberries relatively ELASTIC or relatively INELASTIC? Circle one. Give proof. (3) b. Can we expect that the price reduction causes total consumer expenditures on strawberries to RISE or FALL? Circle one. (1) c. Can we expect that the price reduction causes total producer revenues on strawberries to RISE or FALL? Circle one. (1) d. Why would strawberries have an elasticity coefficient like this; that is, why do consumers buy a lot more? (2)Explanation / Answer
e=% change in quantity demanded/% change in price
=15/10
e=1.5
a. Quantity demanded is elastic as percentage change in quantity demaned is more than the percentage change in price, implying that the e>1, which means demand is elastic.
b. We cann expect the total consumer expenditure on strawberries to rise because the demand for strawberries is elastic. It means when the price falls, demand inpercentage change in quantity demaned is more than the percentage change in price. Therefore, the quantity effect will overpower the price effect, causing total expenditure on strawberries to rise.
c. Producers revenue will increase as consumer expenditure on strwaberries is also rising.
d. Consumers buy a lot because fruits like strawberries have substitutes, so when the price falls, people would want to buy more of strawberries and less of other goods.
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