1.Elasticity

Define price elasticity of demand.(5 points)

Define price elasticity of supply.(5 points)

Define income elasticity of demand.(5 points)

Define cross price elasticity of demand.(5 points)

2.PriceElasticityofDemand

If demand is elastic, total revenue falls when ___________.(2 points)

If demand is inelastic, is the demand curve flat or steep?(2 points)

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C. If demand is inelastic, the numerical value of elasticity is __________.

(2 points)

If demand is elastic, are there many or few substitutes available for the good?

(2 points)

If demand is elastic, do consumers have little or lots of time to respond to a price change?(2 points)

If demand is inelastic, is the money consumers spend on the good a large or small part of their monthly budget?(2 points)

3.PriceElasticityofSupply

If supply is elastic, is the supply curve flat or steep?(2 points)

If supply is inelastic, do suppliers have little or lots of time to respond to a price change?(2 points)

If supply is inelastic, are the production inputs easy or difficult to use in production of other goods?(2 points)

If supply is elastic, the numerical value of elasticity is __________.(2 points)

4.Itmaybehelpfultousegraphstoanswerthefollowingquestions.Youwon'tbegraded

on your graphs, however.

If the price of watermelons fell only a little bit when the supply of watermelons increased a lot, what could you conclude about the elasticity of demand for watermelons?(4 points)

If the price of bottled water increased a lot when the demand for bottled water increased a little bit, what could you conclude about the elasticity of supply of bottled water?(4 points)

____________

AP MicroeconomicsPage 2 of 2Assignment: Apply Concepts of All Elasticities

When you find cross-price elasticity of demand, you can determine whether the goods are substitutes or complements based on whether your answer is a positive or negative number. Explain. Include definitions of substitutes and complements in your explanation.(6 points)

When you find income elasticity of demand, you can determine whether the goods are normal or inferior based on whether your answer is a positive or negative number. Explain. Include definitions of inferior and normal goods in your explanation.(6 points)