ECO 201 HW 3

# ECO 201 HW 3 - demand for (i) business travelers and (ii)...

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ECO 201 HW 3 “Principles of Microeconomics” by Mankiw, 4 th edition. Type your homework. Show necessary steps and reasoning. You may hand draw diagram if you prefer. 1. For each of the following pairs of goods, which good would you expect to have more elastic demand and why? a. required textbooks or mystery novels b. Beethoven recordings or classical music recordings in general c. subway rides during the next 6 months or subway rides during the next 5 years d. root beer or water 2. Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston Price Quantity Demanded (business travelers) Quantity Demanded (vacationers) \$150 2,100 tickets 1,000 tickets 200 2,000 800 250 1,900 600 300 1,800 400 a. As the price of tickets rises from \$200 to \$250, what is the price elasticity of
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Unformatted text preview: demand for (i) business travelers and (ii) vacationers? (Use the midpoint method in your calculations) b. Why might vacationers have a different elasticity from business travelers 8. Consider public policy aimed at smoking. a. Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently costs \$2 and the government wants to reduce smoking by 20 percent, by how much should it increase the price? c. If the government permanently increases the price of cigarettes, will the policy have a larger effect on smoking 1 year from now or 5 years from now? d. Studies also find that teenagers have a higher price elasticity than do adults. Why might this be true?...
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## This note was uploaded on 09/15/2009 for the course ECON 201 taught by Professor Shoonlai during the Summer '09 term at Miami University.

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