Problem 1
Suppose that the total revenue received by a company selling basketballs is \(\$ 600\) when the price is set at \(\$ 30\) per basketball and \(\$ 600\) when the price is set at \(\$ 20\) per basketball. Without using the midpoint formula, can you tell whether demand is elastic, inelastic, or unit-elastic over this price range?
Problem 2
What are the major determinants of price elasticity of demand? Use those determinants and your own reasoning in judging whether demand for each of the following products is probably elastic or inelastic: \((a)\) bottled water; \((b)\) toothpaste, ( \(c\) ) Crest toothpaste, \((d)\) ketchup, \((e)\) diamond bracelets, \((f)\) Microsoft's Windows operating system.
Problem 4
How would the following changes in price affect total revenue? That is, would total revenue increase, decrease, or remain unchanged? a. Price falls and demand is inelastic. b. Price rises and demand is elastic. c. Price rises and supply is elastic. d. Price rises and supply is inelastic. e. Price rises and demand is inelastic. f. Price falls and demand is elastic. g. Price falls and demand is of unit elasticity.
Problem 6
Suppose the cross clasticity of demand for products \(\Lambda\) and \(B\) is +3.6 and for products \(C\) and \(D\) is \(-5.4 .\) What can you conclude about how products \(A\) and \(B\) are related? Products C and D?
