10. You are responsible for running the Whippet Bus Company and have information about the own-price elasticity of demand for bus travel: It is -1.4 at the current price. A friend who works in the competing railway company also tells you that she has estimated the cross-price elasticity of train-travel demand with respect to the price of bus travel to be 7.7.

a) As an economic analyst, would you advocate an increase or decrease in the price of bus tickets if you wished to increase revenue for Whippet?

b) What impact would your price decision have on train ridership?

11.Consider the following demand for a particular product.

Income ($). Quantity Demanded

$100 40

120 50

150 60

200 100

a) Calculate the income elasticity of demand for this product as your income increases from $100 to $120 (using the Mid-Point Formula).

b) What type of product is represented by this demand? Be specific.

12. As the price of cheese rises from $5 to $15 per lb., the quantity of milk produced increases from 10,000 to 18,000 liters per month. (a) What is the cross-price elasticity of supply of milk, as the price of cheese increases? (b) What does this suggest about the relationship between cheese and milk?

13. As the price of sport cars increases from $20,000 to $30,000, the number of Sedans cars produced decreases from 10,000 to 5,000 cars. (a) What is the cross-price elasticity of supply of sedans, as the price of sport cars increase? (b) What does this suggest about the relationship between sport cars and sedans?

9.Consider the own- and cross-price elasticity data in the table below:

percentage Change. Percentage Change in Price in Quantity CDs. Magazines Cappuccinos

CDs -0.25 -0.06 0.01

Magazines -0.13 -1.20 0.27

Cappuccinos -0.07 0.41 -0.85

a) For which of these three goods is demand price-elastic and for which is demand inelastic?

b) What is the effect of an increase in the price of CDs on the purchases of magazines and cappuccinos? What does this

suggest about the relationship between CDs and these other commodities; are they substitutes or complements?