what percentage will quantity demandedfall orrise?

List the five factors that make demand for a goodmore or less elastic.

List the five factors that make demand for a goodmore or less elastic.

Question
Problem3 
Determinants
ofelasticity


List the five

factors that make demand for a goodmore

or less elastic
. Give an exampleforeach(preferablyoneIdidn’ttalkaboutinclass)
.

1
.

2
.

3
.

4
.

5
.

.........

Problem4 Elasticity
#1

a.
Ifyourincomerisesby20%andyoudecidetoincreaseyourpurchasesofclothing
by15%, what is your income
elasticity of demand for clothing? Is clothing a normal or inferiorgood?
b.
Supposetheincomeelasticityofdemandforgadgetsis-2.Answerthefollowing
questions:

If income rises by1%, by
what percentage will the demand for gadgets fall orrise?

If income falls by10%, by
what percentage will the demand for gadgetsfall orrise?

Aregadgetsanormalorinferiorgood?
c.
Supposethecrosspriceelasticityofdemandforgadgetsandwidgetsis0.5.Answer
the followingquestions:

If the price of gadgets rises by1%, by
what percentage will the demand for widgetsfallorrise?

If the price of gadgets falls by3%, by
what percentage will the demand for widgetsfallorrise?

Aregadgetsandwidgetscomplementsorsubstitutes?

.........

Problem5 Elasticity#2
1.
If price elasticity of demand is
1.25, and price rises from $8 to $12, bywhat
percentage will quantity demanded fall?
2.
Ifincomeelasticityofdemandis-0.75,andincomesfallfrom$52,500to$51,000
per capita (per person), then by
what percentage will quantity demandedfall orrise?
3.
Supposeyou’recurrentlysellingslicesofpizzafor$3each,andthepriceelastic-
ityof demand for pizza is 3. By
what amount (in dollars and/or cents) would youhavetoreduceyourpricepersliceinordertoincreasenumberofslicesyousell by15%?

.........

Problem6 RelatedGoods
1.
Ifthepriceoflasereyesurgeryfallsby50percentandthequantityofcontact lensesdemandedfallsby25percent,findthecrosspriceelasticityofdemand
forthesetwogoods.
2.
Arelasereyesurgeryandcontactlensessubstitutesorcomplements?
3.
Suppose the price of laser eyesurgery falls from $3,000 to $2,500.
By what percentagewillsalesofcontactlensesfalls?

.........

Problem7 Comparingdemands
Drawademandcurve,D1,thendrawamoreelasticdemandcurve,D2.

.........

Problem8 Perfection#1
Drawaperfectlyinelasticdemandcurve.

.........

Problem9 Elasticity
andprices

Hint: draw graphsforthese
1.
If the demand for a goodis perfectly elastic and its price is
$15, howmuchwoulditspricebeifitssupplydoubled?
2.
If the demand for a goodis perfectly inelastic and its price
is $50, howmuchwoulditspricebeifitssupplydoubled?

.........

Problem10 Perfection#2
1.
Thedemandforaproductisperfectlyinelasticandthesupplyoftheproductis
perfectlyelastic.Ifitsequilibriumpriceis$10,drawagraphrepresentingthis market.
2. Onthesamegraph,showanewequilibriumpriceof$20.

.........

Problem11 Perfection#3
1.
Thesupplyofaproductisperfectlyinelasticandthedemandfortheproductis
perfectlyelastic.Ifitsequilibriumpriceis$50,drawagraphrepresentingthis market.
2. Onthesamegraph,showanewequilibriumpriceof$25.

.........

Problem 12 Predictingthe priceof oil
Intheyear2020theworldsupplyofoilpeaksandproductioncontinuesforthenext
decadeatthatlevel.Ifthepriceofoilis$80abarrelin2020andworldwidedemand roseby50percentoverthefollowingdecade,abouthowmuchwillthepriceofoilbein2030?(Hint:Drawagraph.)

.........

Problem 13 Elasticity
andcigarettes

Ifthepriceelasticityofdemandforcigarettesamongteenagesis0.5,howmuchwould
the price of a pack of cigarettes haveto
beraised from $10 to cut teenage
smoking by20%?

.........

List the five factors that make demand for a goodmore or less elastic.

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