Please answer following five free response type questions on a word file or on a piece of paper with handwriting. Upload your word file or picture of hand written answers here. Each question is worth 20 points. Be precise, clear and logical in your answers. Draw clear and labelled graphs.
- “Total Revenue always rises with rise in Price” Do you agree or disagree. Give the logic to support your answer. Explain with graphs.
- a) Suppose that a 20% increase in the price of gasoline causes a 5% decrease in the consumption of gasoline and a 30% drop in the sales of SUVs. What can you say about elasticities? 2. b) A 10% increase in the price of pizza causes a 10% drop in the quantity of both pizza and beer sold. Describe elasticities and the nature of the two products.
- Suppose a new research study is published regarding health benefits of avocadoes. As a result, demand for avocadoes rise. Is this “Change in Quantity Demanded” or “Change in Demand”? How will this impact the equilibrium price and quantity of avocadoes? (Show with graphs) .
- Markets tend toward equilibrium and, as a result, will tend to eliminate shortages and surpluses. Why?
- Explain why U.S. minimum wage laws have historically had only a small impact on employment. Use graph to support your answer.