What factors determine the elasticity of resource demand? What effect will each

Question

What factors determine the elasticity of resource demand? What effect will each of the following have on the elasticity or the location of the demand for resource C, which is being used to produce commodity X? Where there is any uncertainty as to the outcome, specify the causes of that uncertainty.

     a. An increase in the demand for product X.

     b. An increase in the price of substitute resource D.

     c. An increase in the number of resources substitutable for C in producing X.

     d. A technological improvement in the capital equipment with which resource C is combined.

     e. A fall in the price of complementary resource E.

     f. A decline in the elasticity of demand for product X due to a decline in the competitiveness of product market

2) What is the significance of resource pricing? Explain how the factors determining resource demand differ from those determining product demand. Explain the meaning and significance of the fact that the demand for a resource is a derived demand. Why do resource demand curves slope downward

3) Aquaculture is the growing of fish, shrimp, and other seafood in enclosed cages or ponds. The cages and ponds not only keep the seafood from swimming away but also provide aqua culturists with strong property rights over their animals. Does this provide a good incentive for low-cost production as compared with fishing in the open seas where there are few if any property rights?

4) Resource consumption per person in the United States is either flat or falling, depending on the resource. Yet living standards are rising because of technological improvements that allow more output to be produced for every unit of input used in production. What does this say about the likelihood of our running out of resources? Could we possibly maintain or improve our living standards even if the population were expected to rise in the future rather than fall?

Explanation / Answer

a. if demand for X increases, demand for C also increased.

b. if price of substitute increase, demand for C increases.

c. if number of alternatives increases for C, demand for C comes down.

d. this change doesnot show any impact on demand of C

e. if E is the complementary product and its price declines, the demand for C increases.

f. if demand for X declines, demand for C also declines.

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