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B at the low price she spends 21 and at the high

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Cowen3e_CH05_Solutions.indd729/06/1512:49 PM
b.At the low price, she spends $21, and at the high price, she spends $20. Since she spends more at the low price, demand must be elastic: a or b. However, this is a small increase (from $20 to $21), so the answer is probably b. c.At the low price, revenue is $300. At the high price, revenue is $300. There-
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S-8•CHAPTER 5 • Elasticity and Its Applications 10.Let’s practice the midpoint formula. Calculate the elasticity of demand for each of the following goods or services. Good orServiceBeginningPriceBeginningQuantityEndingPriceEndingQuantityElasticity of Demand Daily movie ticketsales in Denver, Colorado $650,000$1040,000 Weekly milk salesat Loma Vista Elementary School $11,000$1.50800 Weekly round-trip ticket sales, New York to San Francisco $50010,000$1,0009,000 Annual studentenrollments, Upper Tennessee State University $6,00040,000$9,00039,000 10. 5 5 5 5
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Cowen3e_CH05_Solutions.indd829/06/1512:49 PM
Elasticity and Its Applications•CHAPTER 5 • S-9 Austan Goolsbee found an interesting example of this when he looked at the elasticity of income of highly paid executives with respect to taxes. In 1993, then President Clinton passed a law raising income taxes. This tax hike was fully expected: He campaigned on it in 1992. a.What do you expect happened to executive income in the first year of the tax increases? What about in subsequent years?
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