1. Use the following information to calculate the price elasticity of demand for iPhones:

• if P = $400,Qd = 10,600
• if P = $600,Qd = 8,400

a) Use the midpoint method to calculate percentage change in price

b) Use the midpoint method to calculate percentage change in quantity

c) Calculate the price elasticity of demand.

2. Pharmacies raise the price of insulin by 10%. Does total expenditure on insulin rises or falls?

As a result of a fare war, the price of a luxury cruise falls 20%. Does luxury cruise companies' total revenue rise or fall?

3. Assume the supply of parking spots is inelastic and the supply of wheat is elastic. Suppose population growth causes demand for both goods to double (at each price, Qd doubles).

• For which product will P change the most?
• For which product will Q change the most?
• Draw a graph with the new equilibrium in the market for parking
• Draw a graph with the new equilibrium in the market for wheat