Elasticity
Name:__________________
1) In your own words explain Inelastic, Elastic, and Unitary elastic demand.
2) In Bozeman’s market for rollerblades we find that a price increase of 12% leads to a decrease in demand of 35%. a.
What is the elasticity of rollerblades in Bozeman? b.
Using the Elasticity you found above, the demand for rollerblades is? i.
Inelastic ii.
Elastic iii.
Unitary Elastic iv.
Perfectly Inelastic v.
Rollerblades are rad. ‘LOL’erblade for life!!

3) Consider the market for Taxol, a medication used in chemotherapy that reduces the spread and growth of cancer cells. a.
Taking into account Taxol’s elasticity of demand, graph the supply and demand curves for Taxol in the United States. b.
Why did you draw the demand curve at the slope you did? c.
If the quantity demanded of Taxol is 5 grams when the price is $20 and 8 grams when the price is $5, what is the price elasticity of demand? d.
We can also calculate demand elasticity in terms of consumers’ income—the income elasticity of demand. Provide solid reasoning for whether you think the income elasticity of demand for Taxol would be elastic or inelastic. (How would a change in income affect the quantity demanded?)

4) For each of the following goods explain whether the demand for the good is likely to be relatively elastic or relatively inelastic. Consider the determinants of elasticity–– availability of substitutes, luxury or necessity, length of time to adapt to price changes, and the portion of income spent on a good. a.
Hershey’s Candy Bars b.
A 2016 Lamborghini Aventador, selling price of over $400,000 c.
I >Clickers d.
Gasoline for your vehicle e.
Table salt for cooking
5) Piper Chapman and Alex Vause are drug dealers. The two travel the world selling heroin.
They are deciding whether or not to raise their price per gram of heroin in order to increase revenue. The two want to know if this is a good idea. a.
Is the demand for heroin likely to be elastic or inelastic? Justify your answer. b.
Based on your answer in part A., Is it a good idea for them to raise their prices? Why? c.
Based on your answer in part A., Draw a graph of the market for heroin.