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Economics Homework Help

Question

1. Brutus owns a French toast restaurant and raises his price from $6 a plate to $8 a plate. After

doing this he witnesses a sales drop from 150 to 75. By using the mid-point formula please calculate

the price elasticity of demand and say whether the good is elastic, inelastic, or unitary elastic.

2. Thomas is selling okra at the farmers market and lowers his price from $4 a pound to $2.50 a

pound. When doing this is revenues increase. Given this information, is Thomas producing at an elastic

or inelastic point on the demand curve? How can you tell this?

3. The price elasticity of demand for a good is estimated at -.75. If the producer of the good raises

their price by 15% what would happen to the quantity demanded of that product?

4. When income goes from $15,000 to $25,000 quantity demanded goes from 10,000 to 8,000.

Using the mid-point formula what is the income elasticity of demand and what type of good is it?

5. When Toyota raises the price of their Tundra by 5%, Ford sees the sales of their F-150 trucks

increase by 3%. What is the cross-price elasticity of demand for these two goods and what type of

goods are they?

6. According the following diagram, what is the price elasticity of demand associate with point A

and point B? What time of good is it? If you wanted to increase revenues, what would you do to the

price?