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32) The table above gives the demand schedule for a good. What is the total revenue at point A?
At point B? At point C? At point D? At point E?
33) The table above gives the demand schedule for museum visits.
a. You, as the resident economist, have been given the task of maximizing the museum's total
revenue. What admission price should you charge?
b. What is the elasticity of demand between $6 and $4?
c. Moving along the demand schedule from $10 to $8 to $6 and ultimately to $4, how does the
price elasticity of demand change in size?
34) Steve sells hotdogs from a vending cart downtown. The table above shows his daily total
revenues at four different prices. Between which two prices is the demand for hotdogs
a. elastic?
b. unit elastic?
c. inelastic?
35) Suppose bad weather decreases the quantity of wheat by 12 percent. If the price elasticity of
demand for wheat is 0.6, how would the crop failure affect the price of wheat? Would the crop
decrease benefit or harm wheat farmers?
5.7 Essay: The Price Elasticity of Supply
1) What is the price elasticity of supply? List and briefly define three cases of the price elasticity
of supply.
2) If the price elasticity of supply for corn is 3.12, then is the supply of corn elastic or inelastic?
3) List factors that increase the price elasticity of supply.
4) How does elasticity of supply differ for a product that can be stored, compared to a product
that cannot be stored?
5) Natural gas is difficult to store. What implication does this fact have for the elasticity of
supply of natural gas?
6) Is supply more elastic or less elastic as more time passes after a price change? Explain your
answer.
7) If the price increases by 20 percent and the quantity supplied increases by 40 percent, what
does the elasticity of supply equal?
8) Suppose the quantity supplied of computers increases from 2 million to 4 million units as the
price of a computer increases from $600 to $700. What does the price elasticity of supply equal?
9) The table above gives the supply schedule for a product. Using the midpoint method, find the
price elasticity of supply between points A and B, between B and C, between C and D, and
between D and E.
10) June makes holiday wreaths and sells them during the holiday season. The figure above
shows her supply curve of wreaths per week. Use the midpoint method in this problem.
a. Calculate the percentage change in quantity between points A and B.
b. Calculate the percentage change in price between points A and B.
c. Calculate the price elasticity of supply between points A and B.
5.8 Essay: Cross Elasticity and Income Elasticity
1) The price elasticity of demand is always positive, as is the price elasticity of supply. Is the
cross elasticity of demand always positive? Explain your answer.
2) Explain why the cross elasticity of demand for substitute goods is positive and the cross
elasticity of demand for complements is negative.
3) If the cross elasticity of demand between two goods is negative, are the goods substitutes or
complements?
4) If the cross elasticity of demand between peanut butter and milk is -1.11, then are peanut
butter and milk substitutes or complements?
5) How are the cross price elasticity of demand and income elasticity of demand similar and how
are they different from the price elasticity of demand?
6) If the income elasticity of demand for a Miami Dolphin season ticket is 2.34, then are Dolphin
season tickets a normal or an inferior good?
7) The income elasticity of demand for store brands of soda (that is, non-name brands) is
negative. What does this fact indicate about consumers' perceptions about the store brands?
8) When the price of Ford pickup trucks rises from $18,000 to $19,000, the quantity of Chevy
trucks demanded increases from 112,000 to 144,000. What does the cross elasticity of demand
between Ford and Chevy trucks equal?
9) When the price of bananas rises 2 percent, the quantity demanded of peanut butter falls 4
percent.
a. What is the cross elasticity of demand between these two goods?
b. How are these goods related?
c. If the price of bananas rises, how will that affect the demand curve for peanut butter?
10) Consider two goods: peanut butter and jelly. If the price of jelly increases from $2 a jar to $3
per jar and the quantity demanded of peanut butter decreases from 50 jars to 45 jars, what is the
cross elasticity of demand? Are the goods substitutes or complements?
11) A 10 percent increase in income brings about a 15 percent decrease in the demand for a
good. What is the income elasticity of demand and is the good a normal good or an inferior
good?
12) If income increases from $50,000 to $60,000 while the demand for a good increases from
100 units to 125 units, what is the income elasticity of demand? Is the good a normal good or an
inferior good?
13) The income elasticity of demand for movies in the United States is 3.41. If people's incomes
decrease by 1 percent, what is the decrease in the quantity of movies demanded?
14) The table above gives Sharon's demand for ground beef at two different income levels. Use
the midpoint method in this problem.
a. What is the percentage change in Sharon's income?
b. What is the percentage change in the quantity demanded?
c. What is Sharon's income elasticity of demand for ground beef?
d. Is ground beef a normal or an inferior good for Sharon?
