Question
For each of the following scenarios, decide whether you agree or disagree and explain your answer. a. if the elasticity of demand for cocaine if
For each of the following scenarios, decide whether you agree or disagree and explain your answer.
a. if the elasticity of demand for cocaine if -.2 and the DEA succeeds in reducing the supply substantially, causing the street price to rise by 50%, buyers will spend less on cocaine.
b. every year christmas tree vendors bring 10s of 1000s of trees to new york city and boston. during the last 2 years, the market has been very competitive, as a result, price has fallen by 10%. if the price elasticity of demand was -1.3, vendors would lose revenues altogether as a result of the price decline.
c. if the demand for a good has unitary elasticity, or elasticity is -1, it is always true that an increase in its price will lead to more revenues for sellers taken as a whole.
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