Section 4 Smeagol runs an extremely unique travel guide service called Gollum's Precioussss Guide Services. He wants to raise his prices so he can make enough to buy himself a new ring (he lost his). Here are the figures Smeagol has determined about the demand for Gollum's Precioussss Guide Services. The most inquisitive and curious- Price Quantity minded of that family was called $425.00 Smeagol. He was interested in roots $375.00 2 and beginnings; he dived into deep $325.00 pools; he burrowed under trees and $275.00 4 growing plants; he tunnelled into green mounds; and he ceased to look up at $225.00 the hill-tops, or the leaves on trees, or $175.00 6 the flowers opening in the air: his head $125.00 and his eyes were downward. $75.00 8 $25.00 9 a) Would you expect the overall demand curve for Gollum's Precioussss Guide Services to be elastic or inelastic, just based on the information you have been given about the firm? Why? Use the appropriate economic concepts to explain-but don't use the data or do any math calculations. Draw the overall demand curve for Gollum's Precioussss Guide Services according to your expectation based on the non-numeric information given in the first sentence of Part 4. b) Using the point elasticity formula, what is the Ed of Gollum's changing his price from $25.00 to $75.00? From $75.00 to $25.00? How would you classify these Ed? c) Using the arc elasticity formula, what is the Ed of Gollum's changing his price from $325.00 to $375.00? How would you classify this Ed?d) Which of the two price increases (from $25 to $75 or $325 to $375) would increase revenue for Gollum? Explain why in terms of elasticity. Show Gollum's total revenues at every price level. e) Graph Gollum's demand curve (precisely). Calculate the elasticity for every price change using the arc elasticity formula. Indicate on the graph what part of the curve is elastic and what part of the curve is inelastic and show all Ed between every point. Show the unitary elastic point. Be precise and use the numbers. Hint: better to use graph paper for this question and next. f) Using the revenues in d) and the graph in e), calculate marginal revenue and draw (precisely) the marginal revenue curve. Show precise numbers and precisely where the marginal revenue curve crosses the X axis. (Hint: plot values to quantities) g) Draw the elastic, inelastic, perfectly elastic, perfectly inelastic, unit elastic demand and supply curves. Show the coefficients of price elasticity Ed for each type of curve. h) Gollum's income goes up from $1000 to $1200. His consumption of fish goes up from 20 to 22. Calculate Gollum's income elasticity Ey for fish using the arc formula. Is fish a normal or inferior good for Gollum? How would you classify Gollum's Ex- elastic, inelastic or unitary elastic? i) When Gollum's income went up in part h), his consumption of fried taters went from 20 to 10. Calculate Gollum's income elasticity Ey for fried taters using the arc formula. Is fried taters a normal or inferior good for Gollum? How would you classify Gollum's Ey-elastic, inelastic or unitary elastic? j) When the price of worms goes up from $1 to $2, the quantity of fish that Gollum consumes goes from 20 to 25. Calculate Gollum's cross-elasticity Eab for fish and worms using the arc formula. What type of relationship exists between fish and worms? How would you classify Gollum's Eab- elastic, inelastic or unitary elastic?k} 1lr'tr'hen the price of worms goes up from $1 to $2. the quantity of ketchup that Gollurn consumes goes from 3 to 1. Calculate Gollum's cross-elasticity Eat: for ketchup and worms using the arc formula. 1What type of relationship exists between ketchup and worms\"? How would you classify Gollum's Eatselastic, inelastic or unitary elastic