Worksheet 13: Using the Elasticity Concepts to Analyze Economic Issues 1. Suppose you are the manager of a theater. You currently charge the same admission price to all customers, regardless of age. You hire an economist to determine the price elasticity of demand for admissions by age, and he tells you that at the current price, demand by adults is inelastic and demand by children is elastic. If you want to increase your total revenue by adjusting admission prices, how should they be adjusted? 2. A study of the effects ofa dairy price support estimated the pricc elasticity of supply for milk is 1.2. Suppose that the government is considering raising the minimum price from $0.70 per gallon to $0.90 per gallon. Based on this information, calculate the percentage change in the quantity supplied of milk. Use the midpoint formula. Show work. 3. The government of Bassaland is looking for new revenue sources. It is considering imposing an excise tax on two goods: palm wine and diapers. The price elasticity of demand for palm wine is 0.4? and for diapers it is 1.89. :1. Which good should it tax if the goal is to raise revenue? Explain your answer b. If the government wants to tax only one good, which good should it tax if the goal is to discourage con- sumption? Explain your answer. Elasticity: The Responsiveness of Demand and Supply 93