1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
djyliett [7]
3 years ago
14

Consider two markets: the market for motorcycles and the market for pancakes. The initial equilibrium for both markets is the sa

me, the equilibrium price is
$
6.50
, and the equilibrium quantity is
27.0
. When the price is
$
10.75
, the quantity supplied of motorcycles is
61.0
and the quantity supplied of pancakes is
109.0
. For simplicity of analysis, the demand for both goods is the same.
Business
1 answer:
Taya2010 [7]3 years ago
5 0

Answer:

1. PES for pancakes is 2.45

2. Supply in the market for motorcycles is  less elastic than supply in the market for pancakes.

Explanation:

Hi :)

I feel like part of the question is missing but i was able to find it elsewhere and show you:

1. How to calculate PES using mid-point formula

2. PES for both motorcycles and pancakes

3. Which is more elastic

...

Price elasticity of supply is the responsiveness of quantity supplied to a change in price. it is calculated by dividing the % change in quantity supplied by the % change in price. Generally, it can be of two types:

Price Elastic: Change in quantity supplied is higher than change in price. PES > 1

Price Inelastic: Change in quantity supplied is lower than change in price. PES < 1

When calculated using the mid-point formula, this is the formula used:

<u>(Q2 - Q1) / [(Q2 + Q1)/2]  </u>

(P2 - P1) / [(P2 + P1)/2]

1. We will now substitute the actual values of pancakes in place after identifying them from the question:

Equilibrium Quantity - 27 (Q1)

New Quantity - 109 (Q2)

Equilibrium Price - $6.50 (P1)

New Price - $10.75 (P2)

<u>(109 - 27) / [(109 + 27)/2] </u>

(10.75 - 6.50) / [(10.75 + 6.50)/2]

<u>1.21 </u>

0.493

Therefore, PES for pancakes is 2.45 (approx. two decimal places) suggesting it is price elastic.

2. In order to check whether motorcycles or pancakes are more elastic, we calculate the PES of motorcycles using the same method:

Equilibrium Quantity - 27 (Q1)

New Quantity - 61 (Q2)

Equilibrium Price - $6.50 (P1)

New Price - $10.75 (P2)

<u>(61 - 27) / [(61 + 27)/2] </u>

(10.75 - 6.50) / [(10.75 + 6.50)/2]

<u>0.77 </u>

0.493

Therefore, PES for motorcycles is 1.56 (approx. two decimal places) suggesting it is price elastic. However, it is less price elastic than PES for pancakes.

One reason for this could be production time. Pancakes can be produced much faster than motorcycles. Therefore, it is more flexible to price changes.

You might be interested in
Bond J has a coupon of 7.6 percent. Bond K has a coupon of 11.6 percent. Both bonds have 12 years to maturity and have a YTM of
elena55 [62]

Answer:

Bond J has a coupon of 7.6%  

Bond K has a coupon of 11.6%

12 years to maturity and YTM of 8.2%

first we must determine the current market price of both bonds using the yield to maturity formula:

YTM = {C + [(FV - PV) / n]} /  [(FV + PV) / 2]

  • YTM = 8.2%
  • C = coupon payment = $76 and $116
  • FV = face value or value at maturity = $1,000
  • PV = present value or current market value = ???
  • n = 12 years

current market value of Bond J:

0.082 = {76 + [(1,000 - PV) / 12]} /  [(1,000 + PV) / 2]

[(1,000 + PV) / 2]  x 0.082 = 76 + [(1,000 - PV) / 12]

41 + 0.041PV = 76 + 83.33 - 0.083PV

0.124PV = 118.33

PV = 118.33 / 0.124 = $954.27

current market value of Bond K:

41 + 0.041PV = 116 + 83.33 - 0.083PV

0.124PV = 158.33

PV = 158.33 / 0.124 = $1,276.85

a. If interest rates suddenly rise by 2.2 percent, what is the percentage price change of these bonds?

YTM = {C + [(FV - PV) / n]} /  [(FV + PV) / 2]

  • YTM = 8.2% + 2.2% = 10.4%
  • C = coupon payment = $76 and $116
  • FV = face value or value at maturity = $1,000
  • PV = present value or current market value = ???
  • n = 12 years

market value of Bond J:

0.102 = {76 + [(1,000 - PV) / 12]} /  [(1,000 + PV) / 2]

[(1,000 + PV) / 2]  x 0.102 = 76 + [(1,000 - PV) / 12]

102 + 0.051PV = 76 + 83.33 - 0.083PV

0.134PV = 157.33

PV = 57.33 / 0.134 = $427.84

market value of Bond K:

102 + 0.051PV = 116 + 83.33 - 0.083PV

0.134PV = 97.33

PV = 97.33 / 0.134 = $726.34

Bond J's market price will decrease by ($427.84 - $954.27) / $954.27 = -55.17%

Bond K's market price will decrease by ($726.34 - $1,276.85) / $1,276.85 = -43.11%

b. If interest rates suddenly fall by 2.2 percent, what is the percentage price change of these bonds?

YTM = {C + [(FV - PV) / n]} /  [(FV + PV) / 2]

  • YTM = 6%
  • C = coupon payment = $76 and $116
  • FV = face value or value at maturity = $1,000
  • PV = present value or current market value = ???
  • n = 12 years

current market value of Bond J:

0.06 = {76 + [(1,000 - PV) / 12]} /  [(1,000 + PV) / 2]

[(1,000 + PV) / 2]  x 0.06 = 76 + [(1,000 - PV) / 12]

30 + 0.030PV = 76 + 83.33 - 0.083PV

0.113PV = 129.33

PV = 129.33 / 0.113 = $1,144.51

current market value of Bond K:

30 + 0.030PV = 116 + 83.33 - 0.083PV

0.113PV = 169.33

PV = 169.33 / 0.113 = $1,498.50

Bond J's market price will increase by ($1,144.51 - $954.27) / $954.27 = 19.94%

Bond K's market price will increase by ($1,498.50 - $1,276.85) / $1,276.85 = 17.36%

8 0
3 years ago
At green acres fencing company, eight employees each perform various aspects of the company's work. one person does sales, four
miss Akunina [59]
<span>The fact that the Green Acres Fencing company differentiate the jobs and aspects of the company's work of the employees means that this type of organization reflects Fayol's principle of division of labor. The term division of labor means </span><span>the separation of a work process into a number of tasks</span>
8 0
3 years ago
Read 2 more answers
A(n) __________________ is a term used to indicate any unwanted event that takes places outside the normal daily security operat
ikadub [295]

Answer:

b.security event.

Explanation:

A security event is an deviation or change in the daily operations of information technology service that gives a warning that security policies have been violated or a safeguard has failed.

Significance of a security event is measured by effect on hardware, software, data, or security of systems.

For example if a user contracts a computer virus it is a security event, because this means a security breach occured. Antivirus products are security software that reduces occurrence of security event.

4 0
3 years ago
Read 2 more answers
Suppose a State of California bond will pay $1,000 eight years from now. If the going interest rate on these 8-year bonds is 5.5
aksik [14]

Answer:

The bond is worth $651.59 today

Explanation:

FV = $1000

N = 8

I/Y = 5.5%

Present Value = ?

PV = FV*(1+r)^(-n)

PV =  $1000 * (1 + 0.055)^-8

PV =  $1000 * (1.055)^-8

PV =  $1000 * 0.651599

PV = $651.59

5 0
3 years ago
Kyle's checking account requires that he maintain a minimum balance of $3000 to avoid a monthly service fee, and his balance at
Crank
C. No, because his lowest balance so far this month has been $2989.30 

<span>Start with 3202.93 and add 436.37 = 3639.30 </span>

<span>Then take 650 away (3639.30 - 650 = 2989.20) </span>

<span>It says that he must maintain a minimum of 3000 so when the check cleared he went below this amount. (just verified on apex)
</span><span>
</span>
7 0
3 years ago
Read 2 more answers
Other questions:
  • Which of the following refers to how hard it is to get accepted or get into a 4 year college?
    14·1 answer
  • Jessica lists her faulty treadmill for sale on craigslist but does not disclose the problems with it. If Blake buys the treadmil
    8·1 answer
  • g rporation's budgeted sales for February are $334,000. Webster pays sales representatives a commission of 6% of sales dollars.
    11·1 answer
  • If a government wants to pursue an expansionary fiscal policy, then a tax cut of a certain size will be more expansionary the: 

    13·1 answer
  • First National Bank loans Mike’s Shoe Store $100,000 for remodeling. On their balance sheets, this loan is an asset for Mike’s S
    12·1 answer
  • A special surveillance and rescue team is being deployed to counter the menace of pirates in the Indian Ocean. Nick, Sid, Leah,
    10·1 answer
  • Dr. regan was hired by the siri company to assist them with retaining their employees without lowering profits and expectations.
    5·1 answer
  • Stockholders' equity totaled $94,000 at the beginning of the year. During the year, net income was $24,000, dividends of $9,000
    11·1 answer
  • The dean of a highly reputed business school has decided to pursue a coveted accreditation for the college. To get the faculty's
    6·1 answer
  • In reviewing the purchase request package, you should ensure finding is available and?
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!