1. Suppose there is an increase in the supply of a product. Rank the following own price elasticity of demand classifications according to which has BOTH the largest effect on price and the smallest effect on quantity: perfectly (infinitely) elastic, elastic, inelastic, unit elastic, or perfectly (infinitely) inelastic. Diagrams may be useful.
2. If the own price elasticity of demand for beer is approximately unity, what would be the direction of the change (increase, decrease, no change) in total revenue, total cost and profits of an increase in price.
The change in the direction of total revenue is:_________________________________
The change in the direction of total cost is:_________________________________
The change in the direction of profits is:_________________________________
3. 11. The own price elasticity of demand for cigarettes is 0.5. Suppose all of the
cigarette manufacturers colluded to raise prices by 20%. Predict the direction of the change (increase, decrease, no change) in total revenue, total costs and profits of all companies combined if price were to increase.
The change in the direction of total revenue is:_________________________________
The change in the direction of total cost is:_________________________________
The change in the direction of profits is:_________________________________
4. Christmas toys at Thanksgiving time, Christmas toys on Christmas Eve
The product that is more elastic is ________________________
The own price elasticity of demand determinant(s) involved is/are_________________________________________________________________
1. Suppose there is an increase in the supply of a product. Rank the following own price elasticity of demand classifications according to which has BOTH the largest effect on price and the smallest effect on quantity: perfectly (infinitely) elastic, elastic, inelastic, unit elastic, or perfectly (infinitely) inelastic. Diagrams may be useful.
2. If the own price elasticity of demand for beer is approximately unity, what would be the direction of the change (increase, decrease, no change) in total revenue, total cost and profits of an increase in price.
The change in the direction of total revenue is:_________________________________
The change in the direction of total cost is:_________________________________
The change in the direction of profits is:_________________________________
3. 11. The own price elasticity of demand for cigarettes is 0.5. Suppose all of the
cigarette manufacturers colluded to raise prices by 20%. Predict the direction of the change (increase, decrease, no change) in total revenue, total costs and profits of all companies combined if price were to increase.
The change in the direction of total revenue is:_________________________________
The change in the direction of total cost is:_________________________________
The change in the direction of profits is:_________________________________
4. Christmas toys at Thanksgiving time, Christmas toys on Christmas Eve
The product that is more elastic is ________________________
The own price elasticity of demand determinant(s) involved is/are_________________________________________________________________
