Cheesecake has an (own-price) elasticity of 1.8 while Comic Books have an (own-price) elasticity of 1.6. Which is more responsive to price changes?

11. Draw two demand curves, label the more inelastic curve DI and label the more elastic curve DE.

12. Suppose Income Elasticity of Demand is -0.7 for french fries and Cross-Price Elasticity of Demand for french fries and pizza is 1.8. Then the following happen: Income increases and the price of pizza goes down. Using a Supply and Demand Model, what happens to the equilibrium price and equilibrium quantity of french fries?

13. Victor Laszlo demands two exit visas. He is willing to pay any price to get them. Draw his demand curve.

14. The price is initially 12. Quantity is initially 20. The price falls to 6 and quantity becomes 30. Round to two decimals, only round the final answer.

(a) Using the midpoint method what is the own-price elasticity of demand?

(b) Is demand elastic, inelastic, unit-elastic, etc between these points?

15. The price of ping pong balls fell from 1.49 to 1.29. As a result of this change, the quantity demanded of Red Solo cups increased from 60 to 80. Round to two decimals, only round the final answer.

(a) Using the midpoint method, what is the cross-price elasticity of demand for Red Solo cups? (b) Are these goods compliments or substitutes?

16. Sascha gets a 25% raise. With this he takes his girlfriend Yvonne out to dinner twice a week, instead of once a week, at Rick's. He also takes Yvonne out to the Blue Parrot once every other week, rather than once a week (once every other week can be viewed as demanding half a unit).

(a) Calculate the Income Elasticity of Demand for dinners at Rick's. (Use the midpoint formula for the change in demand)

(b) Are dinners at Rick's a normal or inferior good?

(c) Calculate the Income Elasticity of Demand for dinners at the Blue Parrot. (Use the midpoint formula for change in demand).

(d) Are dinners at the Blue Parrot a normal or inferior good?