Application of elasticities 1.If the price of milk increases by 20% and the quantity of milk demand decreases by 4%, answer: a. Calculate the price elasticity of demand. Is the demand elastic, inelastic, or unitary? Explain your answer. b. Will this product have an easy or hard to find substitute? Why? 2.The quantity demanded by product A increases 8% when the price of product B increases 16% and the other variables remain the same. a. Calculate the cross elasticity of demand. Products A and B, are they complementary or substitutes? Why? b. Drawing a graph, demonstrate the change in the demand curve for product A as a result of the change in the price of product B. 3.Can it be possible that for a particular product the demand curve is perfectly inelastic, regardless of price? Explain your answer in detail. 4.Consider the relationship between the demand for the following products: vodka and grains. a. What happens to the demand for vodka when the price of grains increases? b. Are these products complementary or substitutes? Explain your answer. 5.A company increases the price of its product from $ 210 to $ 240 per unit and stores 30,500 units of this product monthly. a. Is elastic, inelastic, perfectly inelastic, or unitary elasticity? Why? b. Please indicate what an example of this product might be. Why? 6.What is the income elasticity of demand and how is it measured? Explain in your own words with an example; remember to cite the source you used. You should look for information in additional sources to the module study material; you can use the Virtual Library.