1.Use the graph below for the question that follow.
Assume that the current price is $70. The seller wants to increase its revenues and has decided to increase the price to $80. Is this a good idea?
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2. Based on the determinants of elasticity as discussed in the text, guess what the price elasticity of demand of the following products would be (elastic or inelastic?) and state which determinant supports your guess.
(a) ballpoint pens
(b) Crest toothpaste
(c) diamond rings
(d) sugar
(e) refrigerators.
3. Use the information in the
table below to identify the type of cross elasticity relationship
between products X and Y and whether demand is cross elastic or cross
inelastic in each of the following five cases, A to E.
Percent change
Percent change
in quantity
Cross elasticity
Cross Elastic
Cases in
price of Y demanded of
X type
or Inelastic?
A
5
7
______________ ____________
B
–9
–6
______________ ____________
C
5
–5
______________ ____________
D
3
0
______________ ____________
E
–2
10
______________ ____________
4. Use the information in the table below to identify the income elasticity type of each of the following products, A to E.
Percent change
Income
elastic,
Percent change
in quantity
elasticity
inelastic
Product
in income
demanded
type
or unit elastic
A
9
12
__________ __________
B
–6
6
__________ __________
C
3
3
__________ __________
D
6
–3
__________ __________
E –2 –1 __________ __________