(5) [Using price elasticity: 12 pts] Suppose the price elasticity of demand for books is -1.25. Suppose a tax on books raises the price of books by 4%. a. Will the number of books purchased increase or decrease? b. by approximately how much? % c. Will consumers' total spending on books (including the tax) increase or decrease? d. by approximately how much? % (6) [Using price elasticity: 12 pts] One likely cause of global warming is the burning of fossil fuels, which releases carbon dioxide into the atmosphere. Suppose the government wants to reduce the quantity of fossil scls consumed by 3% and the price elasticity of demand for fossil fuels is known to be 41.6 . Assume nothing else changes. a. To reduce the quantity of fossil sels consumed by buyers by 3%, must the price of fossil fuels increase or decrease? [I-Iint: Think Law of Demand] b. by approximately how much? % c. If the price of fossil fuels is changed according to your answer to part (b), will the total amount of money spent on fossil Jels by consumers increase or decrease? d. by approximately how much? % (7) [Using income elasticity: 12 pts] Suppose the income elasticity of demand for travel is 2.5. Now suppose income rises by 2%. a. Will the amount of travel demanded increase or decrease? b. by approximately how much? % c. Will spending on travel, as a fraction of a consumer's total budget, increase or decrease? d. by approximately how much? % (8) [Using income elasticity: 12 pts] Suppose the income elasticity of demand for food is 0.2. Now suppose income rises by 5%. a. Will the amount of food demanded increase or decrease? b. by approximately how much? % c. Will spending on food, as a -action of a consumer's total budget, increase or _ decrease? d. by approximately how much? % (9) [7 pts] The price elasticity of demand for wine is about 1. Suppose the demand curve remains xed but the price of wine falls because of a shift in supply. Will revenue received by wine sellers increase, decrease, or remain constant? Justify your answer. Answers that are identical or nearly identical to another student's will receive zero points. int: Use these e uations: a = % ch / % ch P , and % ch Revenue 2 % ch + % ch P