(a) List and briefly explain, in your
own words, the determinants of the price elasticity of demand.
(b) Choose one of the goods (gasoline or automotive) in your text.
Explain whether or not each of the determinants of
elasticity would make demand for that good more elastic.
Consider the same good you chose in question
#1 and the short-run elasticity given for it in exhibit 6. Using the
relationship between elasticity and revenue, explain whether or not the firm
will want to raise its price.
(a) Would the short-run elasticity of
supply for a football stadium be elastic, inelastic, perfectly elastic, or
perfectly inelastic? Explain.
(b) Would it be the same for the long-run elasticity of supply? Why
or why not?
(a) What happens to consumer and
producer surplus after a rent control is established? Do they increase or
decrease? Explain.
(b) What happens to total welfare? Be sure to include the concept
of deadweight loss in your explanation.
(a) Give an example of a normal good.
(Do not use the examples from the text.) Will the income elasticity
of this good be greater than or less than 1? Explain.
(b) Give an example of an inferior good. (Do not use the examples
from the text.) Will the income elasticity of this good be greater than
or less than 1? Explain.
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