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Thursday, October 22nd, 2009.
You choose to attend university for one year. Tuition and books cost $5000. Room and
board cost $7500. What is the opportunity cost of attending university if next best
1) To work and earn $25000 while living at home, where room and board is free
2) To work and earn $25000 while sharing an apartment and paying $7500 for room
and board $ 5,000
3) to travel for a year, which is free because your uncle will pay
Satisfaction from Travel
4) to travel for a year, which will cost $20,000
Satisfaction - 20,000
Satisfaction - $7,500
The following are the elasticities for Volkswagen Beetles:
Price elasticity of demand = 2
Income elasticity of demand = 1.5
The supply of Beetles is elastic.
True or False?
a. A 10% increase in the price of a Beetle will reduce the quantity demanded by
b. An increase in consumer income will increase the price and quantity of Beetles.
Since price elasticity of demand is greater than 1, total revenue will go down. (F)
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