What is the sign of the elasticity of demand for food with respect to the price of electricity?

INSTRUCTIONS TO CANDIDATES

ANSWER ALL QUESTIONS

Coursework 1

Essay writing and problem solving 

 

(1) “I cannot eat electricity, but after the enormous increase in the price of energy, I have cut back on how much I spend on food.” 

(a) Although physically quite different what is the economic relationship between energy and food? 

 

(B) What is the sign of the elasticity of demand for food with respect to the price of electricity? 

1.A.

The economic relationship between energy and food is substitutes because substitute goods may replace each other in use due to changing economic conditions, in this case it replace in the cost of food to bay for the complementary goods (energy).

 

1.B.

 

 

 

 

(2A) Between 2017 and 219 the price elasticity of demand for Netflix subscription was estimated to be -0.57. In 2020 it was -0.13 

Which of the following factors may account for this development? 

 

(A) A fall in consumer income 

(B) closure of cinema theatres because of Covid-19 

(C) introduction of furlong schemes to support employment levels 

(D) a policy of very low interest rates

 

(2B) When the price elasticity of demand is -0.13 find the percentage change in revenue if Netflix increases the subscription fee by 5% 

2.A

(B) closure of cinema theatres because of Covid-19 

2.B

 

 

 

 

 

 

 

 

 

 

(3) The graph below shows the number of subscribers rises though subscription fee for Netflix and Disney+ price have been rising. Which of the following are True / False? 

 

 

A. The graph shows that the law of demand is not valid 

B. The graph picks up the equilibrium points as demand shifts over time 

C. The graph shows the supply curves of Netflix and Amazon 

D. The graph shows that subscriptions for Disney+ are income elastic 

E. The graph shows that subscriptions for Disney+ is profitable 

 

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