Elasticity Questions 1. The luxury boat industry is currently producing 100,000 boats which sell for $50,000 each. If a 20% excise tax on boats increases the price of boats to $60,000 each and the price elasticity of demand for boats is (-2), how much revenue will the boat tax generate? 2. Suppose that the estimated income elasticity of demand for cars is +2.5 and that the price elasticity is estimated to be -1.2. If the economy is projected to go into a mild recession with a drop in incomes of 5 percent, what price change will offset this expected drop in sales? 3. A ski area is experiencing a decline in the number of lift tickets sold, falling revenues, and inadequate profits. The average price of a lift ticket is $20, and there are 2500 tickets sold daily. The estimated price elasticity of demand is -1.5, and lifts are currently running at an average of 75% of capacity. A. The manager of the ski area proposes a 10% increase in the average lift ticket price. Would this increase the ski area's revenues? B. What would you suggest