1.The owner of a health club asks you for advice about whether the company should raise the price of its membership this year based on the following information:last year the club raised the price of its membership by 5% and the number of members paying the same fee fell by 7%.

2.The Metropolitan Transit System recently announced a 50% increase in the price of a transit ticket.The administrators said that they needed an increase in revenue to cover their rising costs.Explain the economic rationale for this decision.

3.The following data shows the relationship between price and quantity demanded at four different prices for a product:

P = $11, Q_d = 16

P = $9, Q_d = 24

P = $7, Q_d = 32

P = $5, Q_d = 40

Using the midpoints formula, what is the price elasticity of demand between:(a) $11 and $9; (b) $9 and $7; (c) $7 and $5?

4.The following is a straight-line demand curve that confronts a single firm.

Quantity

Pricedemanded(3)(4)

$61__________

52__________

43__________

34__________

25__________

16__________

(a)In column 3, compute total revenue.In column 4, compute the coefficient for the price elasticity of demand at each price using the midpoints formula.

(b)Describe the character of elasticity across the prices based on the total revenue test and the elasticity coefficient.

(c)Does a straight-line demand curve have constant elasticity?

(d)Of what practical significance is your answer to (c)?

5.Using the supply data in the schedule shown below, complete the table by computing the price elasticity of supply coefficients between each set of prices.Indicate whether supply is elastic, inelastic or unitary at each set of prices.

QuantityElasticityCharacter

Pricesuppliedcoefficientof supply

$11130__________________

9110__________________

790__________________

570__________________

350__________________