work book 10-13

EM|10

1. ELASTICITY: The measurement of how changing one economic variable affects others.

PRICE ELASTICITY OF DEMAND: PED is a measure of responsiveness of the quantity of a good or service demanded to changes in its price

2. Calculate the PED if: a) 5/-15=-3

b)10/25=2.5

3. a) inelastic, because they are addictive therefore if the does increase, revenue will also go up

b) elastic, because of substitute goods

c) inelastic, because people will still buy them for the occasion

d) elastic, because of substitute goods

4. It is intended to do both, but it really only creates revenue for the government. This is because the product is inelastic and there for demand for cigarettes will hardly decrease because of how addictive they are.

EM|11

1. INCOME ELASTICITY OF DEMAND: measures the responsiveness of the demand for a good to a change in the income of the people demanding the good.

NORMAL GOODS: normal goods are any goods for which demand increases when income increases and falls when income decreases but price remains constant.

NECESSITY GOODS: Necessity goods are goods that we can't live without and won't likely cut back on even when times are tough, for example food, power, water and gas.

LUXURY GOODS : Luxury goods are products and services that are not considered essential and associated with affluence.

INFERIOR GOODS: An inferior good is a good that decreases in demand when consumer income rises, unlike normal goods, for which the opposite is observed.

CROSS PRICE ELASTICITY OF DEMAND: The cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good.

2. a. 10/20= 0.5 for fish

25/20= 1.25 for pork

b. fish is the inferior good and pork is the normal good

c. farm more pigs

3. a.50/50=1

50/20=2.5

b. gasoline is a sub for ethonol and gas and trucks are compliments

c. NEW TRUCKS- can now be used with ethanol..

4 . because tourism is stable.

5. yachts- luxury

clothes- normal

used clothes- inferior

EM|13

1. PRICE ELASTICITY OF SUPPLY- Price elasticity of supply (PES or Es) is a measure used in economics to show the responsiveness, or elasticity, of the quantity supplied of a good or service to a change in its price.

PRODUCER SUBSTITUTES- a substitute for production.

2. points chosen at 4 dollars and 8 dollars

25/50=0.5

inelastic.

3. a. autos because they are more widely available

b. mp3s because they are very dependednt on a lower price

c. new homes in a building boom because there are so many new homes

4. because there would be more suppliers