Identify the demand elasticity of the following products. 

Product #1: Natural Gas (used for heating a home) (0.5 points) - Elastic or Inelastic - Circle, highlight, or bold your answer

Product #2: Cheerios Cereal (0.5 points) - Elastic or Inelastic - Circle, highlight, or bold your answer

Explanation: (1/2 page max at 12 point font)

Part B: Scenario: Taylor is shopping for groceries. Last week, the price of onions was $1.25 per pound (lbs.), and Taylor was willing to buy 4lbs. Today, the price has gone up to $1.50 per pound, and Taylor is now only willing to buy 2lbs.

What is Taylor's elasticity of demand? (0.5 points) -Elastic or Inelastic or Unit elastic - Circle, highlight, or bold your answer

Show your calculations to support you answer:

Provide an explanation: (0.5 points)

Q2. Price Elasticity of Supply

Part A:

Consider the quantity supplied of a new electric vehicle increased from 1000 units to 1500 units when the price increased from $50,000 to $80,000 per unit.

Calculate the price elasticity of supply using the midpoint formula. Show your work. (2 points)

Explain if the price elasticity of supply is elastic or inelastic. (2 points) 

 Q 3: Monopolies vs Competitive Firms (response is limited to one page).

Research a real world example of a monopoly and provide a brief explanation as to why you believe it is a monopoly.

Explain, how this firm's behaviour would differ if the barriers to entry no longer existed, and the market became competitive. (1 point)

Considering the impact of this monopoly on the consumer, should the government intervene with price controls, such as a price ceiling? Explain your reasoning. (1 point)

Q4: Costs of Production (A Case Study):

Consider the owner of a small woodworking business that specializes in constructing custom-made furniture and fixtures.

The owner has two woodworkers on staff that assist in fulfilling customer orders. Each woodworker receives a monthly salary of $3,000. Additionally, the owner purchased raw materials such as lumber, finish, and hardware, totaling $1,500 per month. The owner owns a small workshop. However, if they were to rent a similar workshop nearby, it would cost $1,000 per month.

Part A:

Calculate the total explicit costs showing your work: (1 point)

Provide a brief explanation why these costs are explicit costs.

Part B:

Considering opportunity cost, what would be implicit costs of production for the business?

(1 point)

Part C:

Consider this scenario: Each month, the woodworking company generates a total revenue of $15,000 from commissioned orders. The explicit costs of production amount to $8,000, while the implicit costs total $1,500.

What is the accounting profit for the company? Show your calculation. (1 point)

What is the economic profit for the woodworking company? Show your calculation. (.5 point)

Explain what the economic profit indicates and why it is different from the accounting profit. (.5 point)

Answer rating: 100% (QA)

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