1. Choose two of these situations and explain whether it would be beneficial to a) raise prices or b) lower prices for this good or service in order to increase the producer’s revenue. Explain your prediction with reference to price elasticity of demand.
a. new living room sofa
b. fees at a community college
c. fresh tomatoes at the grocery store
d. Covid home test
e. a day at a spa
2. Identify each of the following as having a price elasticity of demand greater or less than one and explain why.
Fees to attend community college
Electricity service to your home
Meal at a restaurantGas for your carFresh tomatoesNew Toyota Camry
Identify each of the following as having an income elasticity of demand greater or less than one and explain whyRestaurant meals
Airline travel
Hamburger meat
Local bus travel
Attending private high school
Books needed for a college course
Identify the following pairs of goods as having a positive or negative cross price elasticity of demand and explain why
Razor blades and razors
Ink cartridge and printer
McDonalds hamburgers and Burger King hamburgers
Attending GCC and UCLA
3. Given the following bids to buy used textbooks to a market, calculate the price elasticity of demand between prices $20 and $30. Please show your work
Each of the following is the maximum price a buyer is wiling to pay for the book. $15 $15 $15 $20 $20 $20 $25 $25 $30 $30
4. For gasoline, there is a low price elasticity of demand but a high income elasticity of demand. For the future that could create problems for climate change. Explain why this might be true.
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