1-) (Categories of Price Elasticity of Demand) For each of the following
absolute values of price elasticity of demand, indicate whether demand
is elastic, inelastic, perfectly elastic, perfectly inelastic, or unit elastic.
In addition, determine what would happen to total revenue if a firm
raised its price in each elasticity range identified.
a) ED = 2.5= Elastic
b) ED = 0.8= Inelastic
2-) (Price Elasticity of Supply) Calculate the price elasticity of supply for
each of the following combinations of price and quantity supplied. In
each case, determine whether supply is elastic, inelastic, perfectly
elastic, perfectly inelastic, or unit elastic in each case. Please give
details to your numeric answers.
a) Price falls from $2.25 to $1.75; quantity supplied falls from 600
units to 400 units.
1.6 = Supply elastic
b) Price falls from $2.25 to $1.75; quantity supplied falls from 600
units to 500 units.
0.72 = Supply Inelastic
3-) Consider the following pairs of goods. Which would you expect to
