MODERNPRINCIPLES : MICROECONOMICS 55 MODERNPRINCIPLESOFECONOMICSElasticity and Its Applications Facts and Tools 1.For each of the following pairs, which of the two goods is more likely to be inelastically demanded and why? Table 5.1 should help: a.Demand for tangerines vs. demand for fruit b.Demand for beef next month vs. demand for beef over the next decade c.Demand for Exxon gasoline at the corner of 7th and Grand vs. demand for gasoline in the entire city d.Demand for insulin vs. demand for vitamins 1. a.Fruit is more inelastically demanded because the overall category of fruit has fewer good substitutes than any one item in that category.Solution
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S-1 2.For each of the following pairs, which of the two goods is more likely to be elastically supplied? Table 5.3 should help: a.Supply of apples over the next growing season vs. supply of apples over the next decade b.Supply of construction workers in Binghamton, New York, vs. supply of construction workers in New York State c.Supply of breakfast cereal vs. supply of food d.Supply of gold vs. supply of computers 2. a.Supply of apples over the next decade is more elastic. If the price permanently rises, you can plant some trees or buy them from someone else or invest more in effective horticulture. The time horizon for the next growing season is too short to make such adjustments. Solution S-1
