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- What is the formula for calculating elasticity?Would you expect supply to play a more significant role in determining the price of a basic necessity like food or a luxury like perfume? Explain. Hint: Think about how the price elasticity of demand will differ between necessities and luxuries.Suppose you could buy shoes one at a time, miter than in pain. What do you predict the cross-price elasticity for left shoes and right shoes would be?
- The price elasticity of demand for personal computers is estimated to be 2.2. If the price of personal computers declines by 20 percent, what will be the expected percentage increase in the quantity of computers sold?What is the relationship between price elasticity and position on the demand curve? For example, as you move up the demand curve to higher prices and lower quantities, what happens lo the measured elasticity? How would you explain that?What is the price elasticity of demand? Can you explain it in your own words?
- On Tuesday, the price and quantity demanded are 7 and 120 units, respectively. Ten days later, the price and quantity demanded are 6 and 150 units, respectively. What is the price elasticity of demand between the 7 and 6 prices?Why is the demand curve with constant unitary elasticity concave?What is the formula for line cross-price elasticity of demand?
- Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?The supply of paintings by Leonardo Da Vinci, who painted the Mona Lisa and The Last Supper and died in 1519, is highly inelastic. Sketch a supply and demand diagram, paying attention to the appropriate elasticities, to illustrate that demand for these paintings will determine the price.Suppose the cross-price elasticity of apples with respect to the price of oranges is 0.4, and the price of oranges falls by 3. What will happen to the demand for apples?