2. Price Elasticity of Demand (chapter 5)

• Make one example where the example will come out to be inelastic
  • For instance, the adult market with the example yesterday. You can state something such as “when the price of a Coke is $1.00, the quantity demanded is 1,000. When price increases to $1.50, the quantity demanded decreases to 900.”
  • These numbers will come out to be inelastic
• Then make a completely different, unrelated example where the numbers come out to be elastic
• For both of those, you need to answer the following questions:
  • What is the Price Elasticity of Demand?
  • Is this curve elastic, inelastic, or one of the others? Why?
  • If this price change occurs, what’s the effect on Total Revenue? What is TR at your 1^st price and what is it at your 2^nd price? Does TR it increase/decrease and by how much as a result?

3. Cross Price Elasticity of Demand (Chapter 5)

• Similar to with Price elasticity of demand, I want you to create two scenarios. One where the goods are complements and one where the goods are substitutes (based on the NUMBERS, not the worded example)
• Each of the scenarios/examples should have three answers:
  • What is the Cross Price Elasticity of Demand?
  • Are these goods substitutes, complements, or independent? Why?
  • Is the relationship elastic, inelastic, or one of the others? Why?

4. Income Elasticity of Demand (Chapter 5)

• Same as above, you need to create two scenarios. In one scenario, the good should be a normal good and in the other an inferior good
• Each of your examples should have three answers
  • What is the Income Elasticity of Demand?
  • Is this a normal or inferior good? Why?
  • Is it Income Elastic, Income Elastic, or one of the others? Why?

To summarize, here’s what your test should look like:

1. Supply and Demand article write-up
2. Price elasticity of demand example and solutions where the good has an inelastic demand
3. Price elasticity of demand example and solutions where the good has an elastic demand
4. Cross price elasticity of demand example and solutions where the goods are complements
5. Cross price elasticity of demand example and solutions where the goods are substitutes
6. Income elasticity of demand example and solutions where the good is Income Elastic
7. Income elasticity of demand example and solutions where the good is Income Inelastic

• Each question must be original
• Each question must have both the example as well as the solutions as required/asked for
• Failure to have BOTH the question AND the answers will result in a 0 for that question
• You will be graded on the originality of your scenarios, professionalism/cleanliness of your submission, the accuracy of your solutions, and completing the required information.