Question #1 The demand and supply schedules for gum are: Price Quantity Demanded. Quantity Supplied (per pack) (millions of packs a week) ( millions of packs a week) $1.20 200 80 $1.40 175 100 $1.60 130 140 $1.80 100 180 a. Suppose that the price of gum is $1.75 a pack. Describe the situation in the gum market and explain how the price adjusts. b. Suppose that the price of gum is $1.30 a pack. Describe the situation in the gum market and explain how the price adjusts. Question #2 During the recession, Walmart moved its pet food and supplies to the front with its other fast-growing business, baby products. Retail experts point out that kids and pets tend to be fairly recession-resistant businesses - even in a recession, dogs will be fed, and kids will get their toys. Source: CNN, May 13, 2008 a. What does this news clip imply about the income elasticity of demand for pet food and baby products? b. Would the income elasticity of demand be greater or less than 1? Explain