1. Use the information in the table below to calculate the price elasticity of demand between points A and C. Remember that your answer must have both a sign and a value for the elasticity. Elasticity= Is demand elastic? Inelastic? 2. Use the information in the table below to calculate the price elasticity of demand between points A and C. Remember that your answer must have both a sign and a value for the elasticity. Elasticity: Is demand elastic? Inelastic? 3. Use the information in the table below to calculate the price elasticity of demand between points A and C. Remember that your answer must have both a sign and a value for the elasticity. m 9 W Elasticity: s demand elastic? Inelastic? 0O 10 20 30 40 50 60 70 80 S0 100 4. Use the information in the graph above to calculate the price elasticity of demand for a price drop from $15 to $5. Your answer must have both sign and a value for the elasticity. Elasticity = Is demand elastic? Inelastic? 5. Use the information in the graph above to calculate the price elasticity of demand for a price increase from $5 to $15. Your answer must have both sign and a value for the elasticity. Elasticity = ls demand elastic? Inelastic? 40 50 60 TO 8O 30 100 6. Use the information in the graph above to calculate the price elasticity of demand between points A and C. Remember that your answer must have both a sign and a value for the elasticity. Elasticity: ls demand elastic? Inelastic? Unit Elastic? Perfectly Elastic? Perfectly Inelastic? 7. Use the information in the graph above to calculate the price elasticity of demand at point B. Remember that your answer must have both a sign and a value for the elasticity. Elasticity: ls demand elastic? Inelastic? Unit Elastic? Perfectly Elastic? Perfectly Inelastic? 8. Use the information in the graph above to answer the following questions. a. The midpointis (Quantity __, Price __ b. At the midpoint, the elasticity of demand is equal to c. Without calculating the elasticity, when the price is $5, you know the elasticity of demand is (greater than one/smaller than one /equal to one) d. Without calculating the elasticity, when the price is $35, you know the elasticity of demand is (greater than one/smaller than one /equal to one) Elasticity Applications 9. 10. Assume that currently, a book publisher charges one price for a novel by author B. An economist determines that the price elasticity of demand for die hard fans of this author is 0.4 and that the price elasticity of demand for regular buyers 1s 3. The advertising department comes up with the idea of publishing the same book in a hard cover version to be published first, and a soft cover version to be released two months after the release of the hard cover version. This would allow the publisher to charge different prices to these two groups. How would you advise them to set prices in each group in order to increase total revenues? Assume that currently, all customers pay the same price for a packet of cigarettes "Genenc\" brand D. An economist determines that the price elasticity of demand by adults 1s 0.4 and that the price elasticity of demand by teenagers is 3. The advertising department comes up with the idea of packaging cigarettes differently to target different groups: Target teenagers with "Cool\" brand A and adults with \"less tar\" brand B. How would you adjust prices in each group in order to increase your total revenues? 11. For each of the following scenarios determine whether demand is elastic, inelastic, unit elastic, perfectly elastic, perfectly inelastic or there is not enough information to determine the elasticity: a. Santa Monica College tuition increased from $20 per unit to $25 per unit. Enrollment dropped from 8,000 to 6,000 students. b. Washington apple growers sell 10% more, but their revenue remains the same. c. A $10 decrease in price, results in a 10% increase in quantity purchased. d. A 10% decrease in price, results in a 10% increase in quantity purchased e. Adrop in the price of Good A results in a decrease in total expenditures on Good A. f. After a 5% increase in the price of Good B, the quantity purchased decrease by 2%. g. The price of coffee drops by 25 cents per pound, but you continue to drink the same amount as before. h. The price of tea drops by 25 cents per pound, but revenue remains the same as before. I. The price of natural gas falls and as a result, revenues drop. . The price of strawberries fall, and as a result, revenues for strawberry farmers rise k. The price of Tylencl rise and as a result, revenues rise. I. The price of Pert shampoo rises and as a result, revenues drop. m. Fast food restaurants hire the same number of unskilled workers regardless of the wage rate. n. A tax which increases the price of soda, sports drninks and juice cocktails by 10% would prompt consumers to reduce consumption by 8%. o. It has been estimated that the price elasticity for cigarettes is -0.3. In order to reduce cigarette purchases by 5%, the government would need to tax cigarettes enough to increase the price by Yo 12. Calculate the %change in quantity demanded after a 5% increase in the price of movie tickets if the price elasticity of demand is -0.6. 13. What would a 5% increase in the price of movie tickets mean for the revenue of a movie theater if the price elasticity of demand was -0.67 14. Calculate the %echange in quantity demanded after a 5% increase in the price of movie tickets if the price elasticity of demand was -3. 15. What would a 5% increase in the price of movie tickets mean for the revenue of a movie theater if the price elasticity of demand was -37 16. For the following questions, draw a supply and demand diagram to show effect of the event on Total Revenue. Your answer must include a statement about elasticity and your graph must clearly show how Total Revenues changed as a result. a. Ol producing countries enjoy increases in their total revenues when they restrict supply. What can you conclude about the elasticity of demand? draw a supply/demand diagram clearly showing the specified change in Total Revenue. b. Farmers suffer declines in their total revenues when they become more productive as a group. What can you conclude about the elasticity of demand? draw a supply/demand diagram clearly showing the specified change in Total Revenue. c. Fresh tomato farmers enjoy increases in their total revenues when they become more productive as a group. What can you conclude about the elasticity of demand?draw a supply/demand diagram clearly showing the specified change in Total Revenue. . Oil producing countries would see their total revenues decrease if they were to increase oil production. What can you conclude about the elasticity of demand? draw a supply/demand diagram clearly showing the specified change in Total Revenue. e. Restaurant owners see an increase in total revenues as competition from new restaurants increases. What can you conclude about the elasticity of demand? draw a supply/demand diagram clearly showing the specified change in Total Revenue. 6. Use the information in the table below. Income Demand Good N Demand Good M Demand Good P 14000 35 11.36 7.29 15000 53 11.82 6.56 16000 80 12.29 5.90 17000 120 12.78 5.31 Calculate the Income elasticity for good N for an increase in income from $14,000 to $16,000. e. Is the Income elasticity for good N positive or negative? f. Is good N Normal or Inferior? g. Is good N a luxury/a necessityeither? h. Calculate the Income Elasticity for good M for an increase in income from $14,000 to $16,000. i. Is the Income Elasticity for good M positive or negative? j. Is good M Normal or Inferior? k. Is good M a luxury/a necessityeither? I. Calculate the Income Elasticity for good P for an increase in income from $14,000 to $16,000. m. Is the Income Elasticity for good P positive or negative? n. Is good P Normal or Inferior? o. Is good P a luxury/a necessityeither?7. Use Price Good 80 75 70 65 d. the information in the table below. Demand | Demand Demand X | GoodX | GoodY Good 40 140 170 50 160 160 60 180 150 70 200 140 Calculate the price elasticity of demand for good X for a price increase from $70 to $80 ls the price elasticity of demand for good X positive or negative? |z demand for good X elastic, inelastic, perfectly elastic, perfectly inelastic or unit elastic? Calculate the Cross Price elasticity between good X and good Y for a price increase from $70 to $80. ls the Cross Price elasticity between good X and good Y positive or negative? Are goods X and Y substitutes or complements? Are goods X and Y closely related? Or are they not closely related? how do you determine how closely related these goods are? Calculate the Cross Price elasticity between good X and good Z for a price increase from $70 to $80. ls the Cross Price elasticity between good X and good Z positive or negative? Are goods X and Z substitutes or complements? Are goods X and Z closely related? Or are they not closely related? how do you determine how closely related these goods are