Homework 4a Questions ECON 2106 Principles of Microeconomics Elasticity Concepts

Your store sells party hats (Ed= -2) and streamers (Ed= -1/3). You have a very large inventory that you are trying to sell off, then you will permanently close the store. Your entire focus to maximize your revenue.

1. Do party hats have elastic or inelastic demand?

2. If you raise the price of party hats by 12 percent, what percentage change in party-hat sales will you experience?

3. What effect will this have on your revenue?

4. Does this imply you should raise the price of party hats, or lower the price?

5. Do streamers have elastic or inelastic demand?

6. If you raise the price of streamers by 12 percent, what percentage change in streamer sales will you experience?

7. What effect will this have on your revenue?

8. Does this imply you should raise the price of streamers, or lower the price?