The following is a list of housing costs in five different countries along with their CPI. What
Question:
The following is a list of housing costs in five different countries along with their CPI.
- What is the real cost of year 1 housing using year 2 as the base year for the above 5 countries? (5 points)
- For which country is the real cost of housing declining? (2 points)
2. The market for gravel has been estimated to have these supply and demand relationships:
Supply Qs= -1000+100P
Demand Qd= 100,000 – 100P
where P represents price per unit in dollars, and Q represents sales per week in tons.
- Determine the equilibrium price and sales. (2 points)
- What is the price elasticity of demand at the equilibrium. Is this elastic, unit elastic, or inelastic? (5 points)
- Determine the amount of shortage or surplus that would develop at P = $40/ton. (3 points)
3. The market for iPhones has been estimated to have the following supply and demand relationships:
Supply: P = 200 + 0.01Q
Demand: P = 500 – 0.01Q
where P represents the price and Q represents sales per week.
- Determine the equilibrium price and quantity. (2 points)
- Suppose all consumers experienced a rise in salary. As a result, consumers are now willing to pay $50 more for iPhones, so the new demand equation is P = 550 – 0.01Q. What is the new equilibrium price and quantity as a result of this rise in salary? (2 points)
- As a result of this rise in salary, what is the price elasticity of demand at the equilibrium? Is it the same as before the change? Why or why not. (2 points)
3. Illustrate using demand and supply curves to answer the following questions:
- If the demand curve is more elastic, how does this affect the amount of tax revenue a government can collect in a market? (2 points)
- If the demand curve is more inelastic, does this result in bigger or smaller shortages under a price ceiling below the equilibrium price. (2 points)
Financial and Managerial Accounting
ISBN: 978-1285866307
13th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac