elasticity to determine if in fact tooth extraction is an inferior good? 12. Suppose the price of baseball bats increases by 15% and the demand for baseballs decreases by 25%. What measure of elasticity best explains the relationship between baseball bats and baseballs? Compute the elasticity coefficient. Suppose, as a result of the 15% increase in price of baseball bats, the demand for cricket bats increases by 20%. Compute the appropriate elasticity measure that illustrates the relationship between the two goods. Why is the sign of the elasticity measure significant? Explain. 13. Suppose your income increases by 20% and your quantity demanded of sugar increases by 4%, compute the appropriate elasticity measure, what can we say about sugar? If in response to an increase in income the quantity demanded for a certain brand of pizza declines by 15%, compute the elasticity measure. What can you say about this particular brand of pizza? Why? 14. Assume you are the curator of a museum in a town. Due to the recession, the museum is running short on funds and you want to raise revenues. Would you increase or decrease the price of admission? Explain. 15. Define the following: a. Own Price Elasticity of Demand b. Cross Price Elasticity of Demand c. Income Elasticity of Demand
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- Fall '12