Chapter 5: Q.7 (page 130)
What would the gasoline price elasticity of supply mean to UPS or FedEx?
The products delivered by UPS or FedEx are directly linked to the gasoline price changes as a part of the price elasticity of supply.
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Would you usually expect elasticity of demand or supply to be higher in the short run or in the long run? Why?
If the elasticity is greater than one, is demand elastic or inelastic? If the elasticity equals zero, is demand perfectly elastic or perfectly inelastic?
A city has built a bridge over a river and it decides to charge a toll to everyone who crosses. For one year, the city charges a variety of different tolls and records information on how many drivers cross the bridge. The city thus gathers information about the elasticity of demand. If the city wishes to raise as much revenue as possible from the tolls, where will the city decide to charge a toll: in the inelastic portion of the demand curve, the elastic portion of the demand curve, or the unit elastic portion? Explain.
The average annual income rises from \(25,000 to \)38,000, and the quantity of bread consumed in a year by the average person falls from 30 loaves to 22 loaves. What is the income elasticity of bread consumption? Is bread a normal or an inferior good?
Under which circumstances does the tax burden fall entirely on consumers?
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