Becky eats out at macaroni grill 3 times per year. she receives a raise from $31,900 to $33,500 and decides to eat out at macaro
1 answer:
Answer: Becky's income elasticity of demand for eating at Macaroni grill is 10.22.
We calculate income elasticity of demand with the following formula:
where
η is the Greek letter eta that is used to denote elasticity of demand
Subscript I is used to denote Income elasticity
Q₁ is the quantity consumed after change in income
Q₀ is the quantity consumed before in income
I₁ is the new income
I₀ is the old income
Substituting the values we get,
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Answer:
b. Cannot tell the change in equilibrium quantity. The equilibrium price will decrease
Explanation:
Two things are going on here
1. Income decreases, that will shift demand inwards. People can buy fewer goods at any given price
2. New technology is discovered, that shifts supply outwards. Costs are reduced so producers can produce more at a given price
The resulting effects are that price will decrease but the result in quantity is undetermined. This can be seen with the two examples attached. In both cases, the shifting of the curves from D0->D1 and S0->S1 results in lower prices. However, in one case the equilibrium quantity goes up and in the other goes up.
Answer: Rylan's stock would sell for $21.96 at the end of the four years
Explanation:
PV = Current Price = $31.27
D = Dividend paid each year =$5.70
r = Equity cost of capital = 12%
FV = Price of Rylan's stock at the end of four years = ??
N = Number of years = 4
PV = D +
31.27 = 5.70 +
Solve for FV,
FV = $21.96
Rylan's stock would sell for $21.96 at the end of the four years