Question 4

Assume you own an educational company and offer several educational services. For one year, you change price for different services and record information about how many people buy your service.You thus gather information about the elasticity of demand. If you wish to raise as much as revenue as possible from your company, where will you decide to change the price: for the services that have inelastic demand or elastic or unit elastic? Explain your answer.

Question 5

Your company operates in a perfectly competitive market. You have been told that advertising can help you increase your sale in the short-run. Would you create an aggressive advertising campaign for your product?

Question 6

On November 2018, there was a huge debate in Spain over who should pay the mortgagecreation tax. Should the buyers (consumers) or the sellers of the mortgage (the banks) paythe tax.

During early 2018, the civil division of Supreme Court clearly ruled that the tax on mortgagesshould be paid by consumers and not banks. However, on the 18th of October the administrative division pronounced the other way, that banks should pay.

Using the knowledge that you have learned from this course, what is your recommendationto Spanish people? Explain what do you think about their debate? does the incidence of the tax depends on who pays the tax?

Question 7

Small mom and pop firms like inner city grocery stores, sometime exist even though they do not earn economic profits. How can you explain this?

Question 8

What would the gasoline price elasticity of supply mean to UPS or FedEx?

Question 9

Consider demand for ice-cream if the price for a substitute good increases and the price for a complement good increases, can you tell for sure what will happen to the demand for ice- cream? Explain your answer.