Principles of Economics- Mankiw (5th) 111

Principles of Economics- Mankiw (5th) 111 - CHAPTER 5 E L A...

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CHAPTER 5 ELASTICITY AND ITS APPLICATION 115 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. heating oil during the next six months or heating oil during the next five 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: Q UANTITY D EMANDED Q UANTITY D EMANDED P RICE ( BUSINESS TRAVELERS )( VACATIONERS ) $150 2,100 1,000 200 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 demand for (i) business travelers and (ii) vacationers? (Use the midpoint method in your calculations.) b. Why might vacationers have a different elasticity than business travelers? 3. Suppose that your demand schedule for compact discs is as follows: Q UANTITY D EMANDED Q UANTITY D EMANDED P RICE ( INCOME ± $10,000) ( INCOME ± $12,000) $ 8 40 50 10 32 45 12 24 30 14 16 20 16 8 12 a.
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