ELASTICITY EXERCISE 1. What is own price elasticity of demand and what are the factors that determine it? 2. Explain why the price elasticity of demand is generally a negative number, except in the cases where the demand curve is perfectly elastic or perfectly inelastic. What would be implied by a positive price elasticity of demand? 3. Explain why the sign (positive or negative) of the cross-price elasticity of demand is important. 4. Economists Dale Heien and Cathy Roheim Wessells found that the price elasticity of demand for fresh milk is 0.63 and the price elasticity of demand for cottage cheese is 1.1 (Heien, D. M. and Wessels, C. R., 1998). Why do you think the elasticity estimates differ? 5. Suppose the price elasticity of supply of tomatoes as measured on a given day in July is 0. Interpret this number. 6. The price elasticity of supply for child-care workers was reported to be quite high, about 2. What will happen to the wages of child-care workers as demand for them increases, compared to what would happen if the measured price elasticity of supply were lower