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Elasticity Assignment 1

Economics

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Elasticity Assignment 1. Draw a price elastic demand. Then draw a supply increase on the same graph. Which changed more, the price or quantity? 2. Is a price elastic demand more likely a necessity or a luxury? Does it have a few or a lot of substitutes? 3. Draw an inelastic supply. Then draw a demand increase on the same graph. Which changed more price or quantity? 4. Give examples of the following: a) substitute goods b) complements c) inferior goods d) a good that is price elastic of demand e) a good that is price inelastic of supply 5. Suppose a tax is placed on the producer. What happens to supply? Draw the shift in supply assuming that demand is inelastic. Show in the graph who bears the burden of the tax (in other words, is the producer able or unable to pass the tax cost to the consumer?)