1. (3 points) Suppose an office supply store increased its price of file folders from $.79/box to $.99/box and the quantity demanded decreased from 85 boxes/month to 83 boxes/month.
2. What is the price elasticity of demand for file folders?
3. Tell whether the demand is elastic, unit elastic or inelastic.
4. What happens to the total revenue generated for the office supply store as a result of the price increase, and how does it show the relationship between elasticity and total revenue?

1. (3 points) If the price of a product were increased from $25 to $26, the quantity demanded fell from 10 units to 9 units.
2. Calculate the price elasticity of demand.
3. Tell whether the demand is elastic, unit elastic or inelastic.
4. Calculate the change in total revenue as a result of the price increase, and how does it show the relationship between elasticity and total revenue?

Use the following information to answer question 3 to 5.

In Pioneer Ville, the price elasticity of demand for bus rides is 0.5,

the income elasticity of demand for bus rides is -0.1,

and the cross-price elasticity of demand for bus rides with respect to gasoline price (for household consumption) is 0.2.

3.(2 points)

a.Is the demand for bus rides elastic or inelastic with respect to the price of a bus ride? Why?

b.Would an increase in bus fares increase the bus company's total revenue? Explain your answer.

4.(2 points)

a.Describe the relationship between bus rides and gasoline, according to the given information. Are bus rides and gasoline substitutes or complements? Why?

b.If the price of gasoline increases by 10 percent with no change in the price of a bus ride, how will the number of bus rides change and how much is the percent change in quantity demand of bus rides?

5.(2 points)

a.If incomes increase by 5 percent with no change in prices, how will the number of bus rides change? Calculate the percent change in quantity demanded for bus ride.

b.Is a bus ride a normal good or an inferior good? Why?