ApEc 1101 Principles of Microeconomics Fall 2017 Homework Assignment #2 Due 11. 10. 17 Answer the following questions on separate sheets of paper or in a blue book. Make sure your handwriting is legible, your graphs are clearly labeled, and your equations are clearly stated. Each question is worth 10 points. 1a. The price elasticity of demand for gasoline is -0.03. The price elasticity of demand for gasoline at Shellco station is -1.3. Explain what might account for the different elasticities. 1b. The cross-price elasticity of the demand for cell phones and DVDs is 1.4. Explain why. The cross price elasticity of demand for iPod and DVDs is -1.5. Explain why. 1c. Use the following equation for the demand for fountain pens to calculate the price elasticity of demand for fountain pens, cross-price elasticity with roller balls, and income elasticity. 10 2 0.10 RB Q P I P = − + + Where Q is the quantity demanded, P is the price of a fountain pen, P RB is the price of a roller ball, and I is income. Assume that P = $10, I = $100, and P RB = $20.