Consumers and Computers

Question 1) (10 marks), Read relevant section of book and answer the question.
For consumers, computers are a complement to computer software. Suppose the price of a computer
falls. Simultaneously, suppose that the number of companies selling computer software decreases
proportionately.
a) How do these changes affect the price and quantity of computer software?
b) Draw a hypothetical graph with proper labeling
Your answer must be in at least 100 words. Count # of Word and write here:
Question 2) (10 marks), Read relevant section of book and answer the question.
The below table gives the demand and supply schedules for cat food.
a) If the price is $3.00 per pound of cat food, will there be a shortage, a surplus, or is this price the
equilibrium price?
b) If there is a shortage, how much is the shortage?
c) If there is a surplus, how much is the surplus?
d) If $3.00 is the equilibrium price, what is the equilibrium quantity?
e) Draw a graph from given data with proper labeling.
Your answer must be in at least 100 words. Count # of Word and write here:

Question 3) (10 marks), Read relevant section of book and answer the question.
What factors determine the size of the price elasticity of demand?
Your answer must be in at least 100 words. Count # of Word and write here:
Question 4) (10 marks), Read relevant section of book and answer the question.
How are the cross elasticity of demand and income elasticity of demand similar and how are they
different from the price elasticity of demand?
Your answer must be in at least 100 words. Count # of Word and write here:

Question 5) (10 marks) Read relevant section of book and answer the question.
The table below gives Sharon’s demand for ground beef at two different income levels. Use the
midpoint method in this problem.
a. What is the percentage change in Sharon’s income?
b. What is the percentage change in the quantity demanded?
c. What is Sharon’s income elasticity of demand for ground beef?
d. Is ground beef a normal or an inferior good for Sharon?

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