Problems for Microeconomics 2:
1. The price of hamburgers increases from $4.50 to $5.50, causing the quantity demanded of
soft drinks to fall from 100 to 85. Calculate elasticity – are hamburgers and soft drinks
complements or substitutes?
2. The price of hamburgers increases from $4.50 to $5.50, causing the quantity demanded of
hot dogs to increase by 25%. Are hamburgers and hot dogs complements or substitutes?
Calculate the cross-price elasticity of demand of hamburgers and hot dogs.
3. The demand function for chocolate bars is 𝑄 = 16 −
50
𝑃.
3
Calculate the elasticity of demand
when the price of chocolate bars falls from $0.60 to $0.36 and interpret the number.
4. Sandra receives a raise at work, causing her monthly income to increase by 38%. As a result,
her demand for secondhand clothing falls by 15%. What is Sandra’s income elasticity for
secondhand clothing? Is used clothing a normal or inferior good?
5. After the raise mentioned in Question 4, Sandra begins to golf more often, increasing her
number of games to 4 games per month from 1. Calculate Sandra’s income elasticity for golf
games and interpret the number.
6.
The graph to the left shows a person’s
demand for video games. Recently, the price
of video game consoles has increased from
$350 to $425. This has caused demand for
video games to fall. Using the graph,
calculate cross-price elasticity between
video games and video game consoles.
What is the relationship between the two
goods?
P
35
D’
24
D
32
Q
7. The demand function for sandals is 𝑄𝑠𝑎𝑛𝑑𝑎𝑙𝑠 = 40 − 2𝑃𝑠𝑎𝑛𝑑𝑎𝑙𝑠 + 3𝑃𝑠𝑛𝑒𝑎𝑘𝑒𝑟𝑠 + 0.1𝑀, where
𝑄𝑠𝑎𝑛𝑑𝑎𝑙𝑠 is quantity demanded of sandals, 𝑃𝑠𝑎𝑛𝑑𝑎𝑙𝑠 is the price of sandals, 𝑃𝑠𝑛𝑒𝑎𝑘𝑒𝑟𝑠 is the price
of sneakers, and 𝑀 is income. Suppose that 𝑃𝑠𝑎𝑛𝑑𝑎𝑙𝑠 = 15 and 𝑀 = 1500. What is the crossprice elasticity of sandals when the price of sneakers falls from $50 to $45?
8. As a person’s income increases from $1320/month to $1600/month, his public transit use
changes from 20 bus rides/month to 13 bus rides/month. Calculate income elasticity and
interpret your answer.
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Microeconomics 2 – Elasticity Worksheet / 2
9.
P
The graph to the left shows a person’s
demand for movies. Calculate own-price
elasticity of demand over the range of prices
from $7 to $9. Is demand elastic, inelastic, or
unit elastic?
9
7
D
49
63
Q
10. Demand for microwave dinners is represented by 𝑃𝑀𝐷 = 14 − 2𝑄𝑀𝐷 + 4𝑃𝐹𝑃 − 0.1𝑀, where
𝑃𝑀𝐷 is the price of microwave dinners, 𝑄𝑀𝐷 is the quantity demanded of microwave dinners, 𝑃𝐹𝑃
is the price of frozen pizza, and 𝑀 is income.
Suppose that 𝑃𝑀𝐷 = 4 and 𝑃𝐹𝑃 = 12. Calculate income elasticity when income increases from
$200 to $300. Are microwave dinners normal or inferior goods?
11. When the price of gasoline increases by 15%, quantity demanded of gasoline only falls by
5%. Is demand for gasoline elastic or inelastic? Calculate own-price elasticity.
12. The demand function for tennis balls is 𝑄𝑡𝑒𝑛𝑛𝑖𝑠 𝑏𝑎𝑙𝑙𝑠 = 42 − 0.5𝑃𝑡𝑒𝑛𝑛𝑖𝑠 𝑏𝑎𝑙𝑙𝑠 − 0.2𝑃𝑡𝑒𝑛𝑛𝑖𝑠 𝑟𝑎𝑐𝑘𝑒𝑡𝑠 .
If 𝑃𝑡𝑒𝑛𝑛𝑖𝑠 𝑏𝑎𝑙𝑙𝑠 = 4, what is cross-price elasticity between tennis rackets and tennis balls when the
price of tennis rackets falls from $50 to $45?
13. As income rises from $3000 to $3250, a person’s demand for laptops increases from 1 to 2.
Are laptops a normal or inferior good?
14. Suppose the price of all produce increased by 50%. This causes consumers to purchase
25% less produce than before the price change. What is elasticity of demand? Interpret your
answer.
15. The price of concert tickets increases from $75 to $100. If own-price elasticity of demand is
1.5, how much did quantity demanded of concert tickets change by. Is demand for concert
tickets elastic or inelastic?
16. A farmer sells carrots for $0.50/lb. and sells 100 lbs of carrots each month. He decides to
raise the selling price to $0.51/lb., and can now no longer sell anything. What is the price
elasticity of demand for carrots? What would the graph of the demand curve for carrots look
like?
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