Econ answers

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Homework 4 Master
1. College logo t-shirts priced at $15 sell at a rate of 25 per week, but when the bookstore marks them down to $10 it finds that it can sell 50 t-shirts per week. What is the price elasticity of demand for the logo t-shirts? Is the demand elastic or inelastic?
Answer

Ed = -1.675 (elastic)

2. Check out the following video (http://www.youtube.com/watch?v=ncZkrO06le8). Do the early shoppers appear to have elastic or inelastic demand on Black Friday?
Answer

Elastic. Very responsive to price changes.

3. In the accompanying table, assume that the price of ice skates increases from $10 to $20 per pair. Using the midpoint method, calculate the price elasticity of demand for ice skates for hockey
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Leah was willing to pay $100. When her friend Becky sees the sweater, she loves it and thinks it is worth $150, so she offers Leah $125 for the sweater and Leah accepts. Leah and Becky are both thrilled with the exchange.

Determine the total surplus from the original purchase and the additional surplus generated by the resale of the sweater. ($1,000)

Answer: Leah was willing to pay $100 and the sweater cost $80, so she keeps the difference, or $20, as
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