Calculating Price Elasticity of Demand in Tomato Market Assignment

Assignment Task

Question 1

Price elasticity of demand and Perfect Competition

The market for organic tomato is competitive. Table 1 below presents the price and demand schedule for tomato in the market.

 Table 1. Price and demand for organic tomatoes

Price of organic tomato (per 100g)	Quantity demanded
$3	2000
$4	1600
$5	1000
$6	700
$7	420
$8	100
$9	0

         

Referring to Table 1 above, calculate the price elasticity of demand for organic tomatoes when its price increases from $8 per kg to $5 per kg. [Hint: Apply the mid-point formula and round up to two decimals. Please include a minus sign for your answer.].

Qestion 2

Price elasticity of demand and Perfect Competition

 Table 1. Quantity of tomatoes and marginal cost

Quantity of organic tomatoes	Marginal cost
0	$0
10	$2
20	$4
30	$6
40	$8
50	$12

 

Assume the fixed cost is $140.    

Referring to Table 1 above, calculate producer’s average total cost in Table 2 above and answer the following questions.

When quantity of organic tomato is 10, the average cost is $    

When quantity of organic tomato is 20, the average cost is $     

When quantity of organic tomato is 30, the average cost is $ 

When quantity of organic tomato is 40, the average cost is $ .

Question 3

Price elasticity of demand and Perfect Competition

The market for organic tomato is competitive. Table 1 below presents the price and demand schedule for tomato in the market.

 Table 1. Price and demand for organic tomatoes

Price of organic tomato (per 100g)	Quantity demanded
$6	2000
$7	1600
$8	1000
$9	700
$10	420
$11	100

 Each organic tomato farmer in the market has a cost schedule which is shown in Table 2 below.

 Table 2. Quantity of tomatoes and marginal cost

Quantity of organic tomatoes	Marginal cost
0	$0
10	$2
20	$4
30	$6
40	$8
50	$12

 

Assume the fixed cost is $140.    

Assume that the price of organic tomatoes is $8 per kg. How many organic tomatoes should each farmer sell? How many farmers are there? How much profit does each farmer gain? 

Fill in the blanks below.

1. Each farmer should sell organic tomatoes.

2. There are farmers in the market. 

3. The profit for each farmer is $ 

Question 4

Price elasticity of demand and Perfect Competition

The market for organic tomato is competitive. Table 1 below presents the price and demand schedule for tomato in the market.

Price elasticity of demand and Perfect Competition

The market for organic tomato is competitive. Table 1 below presents the price and demand schedule for tomato in the market.

 Table 1. Price and demand for organic tomatoes

Price of organic tomato (per 100g)	Quantity demanded
$6	2000
$7	1600
$8	1000
$9	700
$10	420
$11	100

 

Each organic tomato farmer in the market has a cost schedule which is shown in Table 2 below.

 Table 2. Quantity of tomatoes and marginal cost

Quantity of organic tomatoes	Marginal cost
0	$0
10	$2
20	$4
30	$6
40	$8
50	$12

 

Assume the fixed cost is $140.    

Suppose you, as a business consultant, predicted that the price of organic tomato will drop from $10 to $9 in the long-run. Based on your answers in Question 2, should the farmer stay in the business?

Fill in the blanks.

1. At the market price $9, the farmer's profit is
2. The farmer should not exit exit in the business since the market price isesser than greater than  the average total cost.

Question 5

Figure 1. Australia's vacancy rate and change in asking rent in August 2022.

Referring to Figure 1 above, select the appropriate answer(s) to represent the national residential situation in Australia. 

Group of answer choices

The rising interest rates are partly blamed for the national residential situation.

Unfavourable rental market regulations had discouraged landlords from residential investment.

The new demand curve for rental properties shift to the right.

The rising asking rents in August 2022 indicates that Australia is experiencing rental crises.

The new supply curve of rental properties shifts to the right.

Imposing rent control is probably the best solution to curb this housing shortage crisis.

Question 6

Elasticities and Tax Incidence

Table 1. Cross-Price Elasticity Estimates of Unhealthy Food for  low educated households

Cross-price elasticity of unhealthy food with respect to the price of:
Bread and cereal	0.475
Meat	0.252
Fruit and vegetable	-0.121
Dairy	-0.307
Soda and juice	-1.382

 

Referring to the Table 1 above, complete the matching activities.

Group of answer choices

Unhealthy food and bread and cereal are

Unhealthy food and meat are                        

Unhealthy food and dairy are

Unhealthy food and soda and juice are

Question 7

Estimated Long-run Price Elasticities of Demand

Item	Elasticity coefficient
Medical care	0.92
Housing	1.88
Petrol	0.70
Motor cars	2.24
Holiday Travel	2.4

 

Referring to the table above, which of the following statements are correct? 

Housing is more demand elastic than travel. 

Housing and Motor cars are demand inelastic.

Travel companies should increase their air ticket for holiday-makers to earn more revenue.

Consumers are more sensitive to price changes in housing and petrol, but less sensitive to price changes in medical care and petrol

Question 8

Elasticities
Table 1. Estimated own price and cross-price elasticities of demand in the USA

Product	Own price elasticity	Cross-price elasticity with respect to the price of vegetables
Milk	-0.790	-0.033
Meat	-0.758	-0.095
Egg	-0.471	+0.026
Juice	-1.165	+0.037

 

Source: Bing-hwan Lin, Steven T. Yen, Diansheng Dong and David N. Smallwood, “Economic incentives for dietary improvement among food stamp recipients”, Contemporary Economic Policy, Vol. 28, no. 4, October 2010, pp. 524-36.

Based on Table 1 above, fill in the blanks.  

1. If the price of vegetables reduces by 20%, the quantity demanded of eggs decreases by 0.52 0.25 %.  (Hint: Use cross-price elasticity of demand concept)

2. If the milk price falls by 20% due to an oversupply of milk, the quantity demanded of milk would increase by0.0158 15.80 %.  (Hint: Use the price elasticity of demand concept)

Question 9

Authorities in Germany aim to expand an open-pit coal mine in Lutzerath, West Germany, which can lead to the demolition of villages for coal mining. A group of climate activists has presented in the area to protest against coal mining explorations and operations. Which of the graphs below depicts the externality of the coal mine exploration in Lutzerath? 

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