22) The currency
used by the Confederate States of America during its brief existence from 1861
to 1865 has become a collector’s item today.
The Confederate Currency supply is perfectly inelastic. As the demand for the collectible increases
and some of the old currency is destroyed or no longer of value as a
collectible, what happens to the market price?
23) Suppose the
cable TV industry is currently unregulated.
However, due to complaints from consumers that the price of cable TV is
too high, the legislature is considering placing a price ceiling on cable TV
below the current equilibrium price.
Assuming the government does make this price ceiling law, please
construct a diagram that shows the impact of this law on the cable TV market,
and please briefly explain the effects on market prices and quantities with
supply and demand analysis. Also, if the
cable TV company is worried about disgruntling customers, the company may
introduce a different type of programming that is cheaper for the company to
provide yet is equally appealing to customers.
What would be the effects of this action?
24) Suppose that
the resale of tickets to professional football games is illegal in
Missouri. Due to the high demand for
Chiefs (who play in Kansas City, Missouri) tickets there is a shortage of
tickets at the current ticket price.
Given that the Chiefs will not raise the price at which they sell the
tickets, what would be the result of allowing tickets to be resold in a
secondary market at whatever price the market would support? If speculators entered the market and began
buying tickets directly from the Chiefs in hopes of reselling the tickets
later, what would happen to the line outside of the ticket offices when the
tickets are initially sold?
Elasticities of Supply and Demand
1) The income
elasticity of demand is the
change in quantity demanded resulting from a one unit increase in income.
change in quantity demanded resulting from the absolute increase in income.
change in quantity demanded resulting from a one percent increase in income.
change in income resulting from a one percent increase in quantity demanded.
change in income resulting from a one percent increase in price.
2) The price
elasticity of demand for a demand curve that has a zero slope is
C) negative but
approaches zero as consumption increases.
A) the slope of
a demand curve.
B) the inverse
of the slope of a demand curve.
percentage change in one variable in response to a one percent increase in
of price to a change in quantity.