1. The demand and supply schedules for simple calculators and for T-shirts are as follows:

Calculators T-shirts

Price Demand Supply Demand Supply

$16 600 800 400 800

15 625 775 475 775

14 650 750 550 750

13 675 725 625 725

12 700 700 700 700

11 725 675 775 675

10 750 650 850 650

9 775 625 925 625

8 800 600 1000 600

a) What are the equilibrium prices and quantities in the two markets? Draw supply and demand curve diagrams showing this.

b) How does revenue change in the two markets, as the price rises in $1 increments from $8 to $16? Add new columns to capture revenue changes.

c) What do you learn about the price elasticity of demand in the two markets from your calculations in b) above? Confirm this by calculating and comparing the elasticities in the two markets for two different price changes of $1 each. Say the price changes from $12 to $13. Use midpoint formula for price elasticity of demand to calculate the answers for each market (Calculators and then T-Shirts).