Additional Problem #4
:
Elasticity
Complete each statement or answer the question in the spaces provided.
(1)
The price
elasticity of demand for a new car model called Sputter is estimated to be
equal to .40.
This means that a 1% increase in Sputter's price will result in a
%
(increase/decrease) in the number of Sputters demanded.
Demand
is therefore
(elastic/unit elastic/inelastic). If the manufacturer wishes to
raise total sales revenue from its Sputter model, it should
(raise/lower)
the price of the car.
(2)
The quantity of Good A increases by 10% when Good B's price increases by 15%.
The crossprice
elasticity of demand is
.
These two goods must therefore
be
(substitutes/complements/independent).
Give an example of
two goods of this type:
(3)
When Maria's income falls from $50,000 to $30,000, she increases purchases of
Good A from 50 units a year to 100 units a year.
The income elasticity
of demand is
therefore equal to
.
For Maria, Good A is
(normal/neutral/inferior)
b
e
c
a
u
s
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This note was uploaded on 10/26/2009 for the course ECON 18000420 taught by Professor Bresnock during the Fall '09 term at UCLA.
 Fall '09
 BRESNOCK
 Price Elasticity

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