Price Elasticity of Demand
(a) List and briefly explain, in your own words, the determinants of the price elasticity of demand.
(b) Choose one of the goods (gasoline or automotive) in your text. Explain whether or not each of the determinants of elasticity would make demand for that good more elastic.
Consider the same good you chose in question #1 and the short-run elasticity given for it in exhibit 6. Using the relationship between elasticity and revenue, explain whether or not the firm will want to raise its price.
(a) Would the short-run elasticity of supply for a football stadium be elastic, inelastic, perfectly elastic, or perfectly inelastic? Explain.
(b) Would it be the same for the long-run elasticity of supply? Why or why not?
(a) What happens to consumer and producer surplus after a rent control is established? Do they increase or decrease? Explain.
(b) What happens to total welfare? Be sure to include the concept of deadweight loss in your explanation.
(a) Give an example of a normal good. (Do not use the examples from the text.) Will the income elasticity of this good be greater than or less than 1? Explain.
(b) Give an example of an inferior good. (Do not use the examples from the text.) Will the income elasticity of this good be greater than or less than 1? Explain.
In this case, a good could be termed as a luxury or necessary product. For necessary products, consumers are often not highly responsive to the changes in price, which makes their elasticity relatively…