ECON101 Exam Solutions Fall 2018: Marginal Cost, Fixed Cost, Cirque Du Soleil

• School: University of Alberta
• Department: Economics
• Course: ECON101
• Professor: All

Document Summary

Econ 101: the correct answer is c. The cross price elasticity between tortilla chips and dips is -0. 8, so the two are complements. Elasticity = % change in quantity /% change in price. Cross price elasticity measures the responsiveness of demand for one good following the change in price of another. If tortilla chips and dips were substitutes, sale of dips would have increased instead of fall: the correct answer is c (c) Explanation: a small change in price leads to a bigger change in quantity demanded. If sellers increase the price of the good, consumers are more likely to shift to a different product. So, in order to maintain a high level of demand for the product, sellers would have to pay a higher portion of the tax: the correct answer is b. Be as happy as possible given their income. Explanation: demand for inferior goods tend to decrease when income increases: the correct answer is c.