Elasticity of demand practice assignment 2012

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  • 1. Elasticity of Demand Practice Assignment 1. Describe the relative price elasticity of demand by simply stating very elastic, somewhat elastic, very inelastic, somewhat inelastic?(2 marks) a) clothing _________________________ b) shirts ___________________________ c) silk shirts ________________________ d) designer silk shirts _________________ 2. Describe each of the following as either elastic or inelastic and explain (5 marks) a) a Honda Civic automobile Elastic or Inelastic? _________________ Explain______________________ _______________________________________________________________ b) an Air Canada ticket to Hawaii Elastic or Inelastic? _________________ Explain______________________ _______________________________________________________________ c) bread Elastic or Inelastic? _________________ Explain______________________ _______________________________________________________________ d) salt Elastic or Inelastic? _________________ Explain______________________ _______________________________________________________________ e) electricity Elastic or Inelastic? _________________ Explain______________________ ______________________________________________________________
  • 2. 3. Read the following quotations. Describe the relative price elasticity of demand by simply stating very elastic, somewhat elastic, very inelastic, somewhat inelastic?Explain your answers. (2 marks each) a) The freezing weather in Florida’s citrus belt will reduce this year’s previously predicted bumper crop. How elastic? _________________ Explain___________________________ _______________________________________________________________ b) Transit ridership drops when fares increase, but revenue, nevertheless, rises. How elastic? _________________ Explain___________________________ _______________________________________________________________ c) The 10% increase in postal rates led the Hydro company to e-mail bills. How elastic? _________________ Explain___________________________ _______________________________________________________________ d) Without any morning coffee, I can’t start my day. Coffee is an essential. How elastic? _________________ Explain___________________________ _______________________________________________________________