Some microeconomics questions

From: Lara (zgall1_at_aol.com)
Date: 09/28/04 

Date: 28 Sep 2004 13:53:45 -0700

I am studying for a test and these questions are a part of my
review booklet. I am having trouble with them and I would
appreciate any help you could give me. Thanks.

1. True or false: Goods that are produced at a constant
opportunity cost have an elastic demand

2. Drought in many wheat-growing areas cut the supply of
wheat in 2004 by 4 percent. The price elasticity of demand for
wheat is 0.5, and the cross elasticity of demand for pasta with
respect to the price of wheat is 2.2.
a. By how much will the price of wheat rise?
b. By how much will the quantity demanded of pasta change?
c. Pasta makers estimate that the change in the price of wheat
in part (a) will increase the price of pasta by 20 percent. What is
the pasta makers' estimate of the price elasticity of demand for
pasta?

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