Chapter 4 Problem 11
Suppose that during a given year: (1) the price of TV sets increases by 4 percent in Japan, (2) the dollar depreciates by 5 percent with respect to the yen, (3) Consumer incomes in the United States increase by 3 percent, (4) the price elasticity of demand for imported TV sets in the United States is -1.5, and (5) consumers’ income elasticity of demand for TV sets in the United States is 2. (a) If the price of the imported TV set was $300 in the United States at the beginning of the year, approximately how much would you expect the price of the same imported TV set to be in United States at the end of the year?
The 4% increase in the price of TV sets in Japan and the 5% depreciation of the dollar lead t a total increase of 9% in the dollar price of imported TV sets in the U.S., from $300 to $327.The price of TV in US at the end of the year = 300*(1+4%+5%) =US $327 (b) By how much would the quantity demanded of imported TV sets in the United States change as a result of the change in price only?
Price elasticity of demand = -1.5
Change in price = +9%
Change in quantity demanded due to changes in price = -1.5*9%=-13.5% (Decrease by 13.5%) c) By how much would the demand for imported TV sets in the U.S. change as a result of the increase in consumer income alone?
Income elasticity of demand = 2
Change in consumer income = +3%
Change in quantity demanded due to changes in consumer income = 2 * 3%= 6% (Increase by 6%). This is determined by multiplying the income elasticity of demand (2) by the US consumer income increase (3%). (d) By how much would the demand for imported TV sets in the U.S. change as a result of both the change in price and in incomes?
Change due to both price change and consumer income change = (1+6%)*(1-13.5%)-1= -8.31%. A decrease by 8.31% The subprime mortgage market and business ethics, and should government reregulate or deregulate the market?” Accounting and financial records keeping was put...
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