We read your photo as:

From Table 2.1, calculate the elasticity of supply between these points A and B, and D and E. State the nature of elasticity in (a)i above. Briefly explain any four types of elasticity of demand.

Economics

ScanSolve AI Answer

Answers

2 parts
a(i)
272.73
a(ii)
217.39

Step-by-step solution

7 steps

Part a(i)· 3 steps

Calculate the Retail price index.

  1. Identify the prices for the base year (2019) and the current year (2022).

    Prices in 2019 (P0P_0): Rice = N600, Beans = N500
    Prices in 2022 (P1P_1): Rice = N1,000, Beans = N2,000

  2. Calculate the sum of prices for the base year and the current year.

    ∑P0=600+500=1100\sum P_0 = 600 + 500 = 1100 ∑P1=1000+2000=3000\sum P_1 = 1000 + 2000 = 3000

  3. Apply the formula for the Retail Price Index (RPI).

    RPI=∑P1∑P0×100\text{RPI} = \frac{\sum P_1}{\sum P_0} \times 100 RPI=30001100×100\text{RPI} = \frac{3000}{1100} \times 100 RPI≈2.72727×100\text{RPI} \approx 2.72727 \times 100 RPI≈272.73\text{RPI} \approx \boxed{272.73}

Part a(ii)217.39

Calculate the Weighted retail price index if the consumer spends three times as much on rice than on beans.

  1. Assign weights based on spending.

    Weight for Rice (WriceW_{rice}) = 3
    Weight for Beans (WbeansW_{beans}) = 1

  2. Calculate the weighted sum of prices for the base year (2019).

    ∑(P0×W)=(600×3)+(500×1)=1800+500=2300\sum (P_0 \times W) = (600 \times 3) + (500 \times 1) = 1800 + 500 = 2300

  3. Calculate the weighted sum of prices for the current year (2022).

    ∑(P1×W)=(1000×3)+(2000×1)=3000+2000=5000\sum (P_1 \times W) = (1000 \times 3) + (2000 \times 1) = 3000 + 2000 = 5000

  4. Apply the formula for the Weighted Retail Price Index.

    Weighted RPI=∑(P1×W)∑(P0×W)×100\text{Weighted RPI} = \frac{\sum (P_1 \times W)}{\sum (P_0 \times W)} \times 100 Weighted RPI=50002300×100\text{Weighted RPI} = \frac{5000}{2300} \times 100 Weighted RPI≈2.17391×100\text{Weighted RPI} \approx 2.17391 \times 100 Weighted RPI≈217.39\text{Weighted RPI} \approx \boxed{217.39}

Part a(iii)

Interpret your answer in (ii.) above.

A weighted retail price index of 217.39 indicates that, considering the consumer spends three times more on rice than on beans, the overall cost of this basket of goods has increased by approximately 117.39% from 2019 to 2022.

Part b

Briefly explain the three motives for holding money.

The three motives for holding money are:

  • Transactions motive: Individuals hold money to facilitate everyday purchases and payments for goods and services.
  • Precautionary motive: Money is held as a reserve to cover unforeseen expenses or emergencies, providing a buffer against unexpected events.
  • Speculative motive: People hold money to take advantage of future investment opportunities, particularly in financial assets like bonds, when they anticipate changes in interest rates.
Was this helpful?

Try one yourself

A new problem that tests the same skill.

Still stuck on this one?

Ask a follow-up, and the answer starts from this question.

Got a different question?Ask your own question

More Economics Questions

QFrom Table 2.1, Calculate: i. co-efficient of income. ii. what type of goods is garri to Mr…QCalculate the price elasticity of demand at points A and B given the demand schedule. Explain the…QGiven a table showing price and quantity demanded, calculate the price elasticity of demand using…QFind the elasticity of demand given Q k where k and n are positive constants.(A) Does the elasticity…QUnderstand the concept of demand elasticity.
Browse by topic:Microeconomics
See all Economics questions →
Got a syllabus? Photograph it and I'll tell you what's due and what's worth the most.
Handwritten step-by-step solution preview

Handwritten Step-by-Step Solution

Get this as a handwritten image on WhatsApp — like a tutor wrote it for you.

Try on WhatsApp