Posted: October 17th, 2013
a) If the price elasticity of demand for plastic surgery is inelastic, then it shows that the demand for the service is insensitive to price changes. Thus, a decrease in the number of operations due to an increase in the price of plastic surgery is false. In fact, the demand for plastic surgery will be unaffected regardless of price increase
b) It is also false that the percentage change in price of plastic surgery is less than the percentage change in the number of operations demanded. Usually, if the demand for the service is inelastic, then the percentage change in demand is less than the percentage change in price due to the inability of the demand to change regardless of price changes
c) It is true that the changes in the price of plastic surgery do not affect the number of operations. If the demand is inelastic, then it shows that demand for the service is unaffected regardless of the increase or decrease in price
d) It is false to state that the quantity demanded is responsive to price changes in plastic surgery. If the demand is responsive, then it means the demand is price elastic. In this case, the demand is price inelastic, which means that it is not influenced by price changes.
e) The expenditures on plastic surgery will increase because of the increase in the price of plastic surgery. Since the demand is price inelastic, the change in demand is less than the change in price. Therefore, if price changes more than the quantity, then the expenditure changes in the price’s same direction.
a) The first statement does not factor in the Law of Equilibrium in determining price and demand. In economic sense, if the firm were to increase its price, normally, the demand will reduce assuming that other determinants of demand such as availability of substitutes.
b) In normal instances, supply can never equal demand. This is because the price determines the level of supply and demand for a product. If the price of the copy is high, then the demand and supply will reduce. However, if the price is low, then the demand will increase and thus increasing the level of supply.
c) An increase in price of lettuce will decrease the demand for the commodity. Therefore, to restore equilibrium, producers will have to lower the quantity or supply of the lettuce to reduce costs.
d) The wages of the carpenters did not rise due to unionization. The market demand for carpentry was high hence leading to an increase in wages. Additionally, if the number of carpenters increases, then the vacancies for employment will reduce due to the increase in the number of carpenters.
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