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Chapter 5: Q.7 (page 130)
What would the gasoline price elasticity of supply mean to UPS or FedEx?
The products delivered by UPS or FedEx are directly linked to the gasoline price changes as a part of the price elasticity of supply.
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The federal government decides to require that automobile manufacturers install new anti-pollution equipment that costs $2,000 per car. Under what conditions can carmakers pass almost all of this cost along to car buyers? Under what conditions can carmakers pass very little of this cost along to car buyers?
If supply is inelastic, will shifts in demand have a larger effect on equilibrium price or on quantity?
If supply is elastic, will shifts in demand have a larger effect on equilibrium quantity or on price?
What is the formula for the cross-price elasticity of demand?
What is the relationship between price elasticity and position on the demand curve? For example, as you move up the demand curve to higher prices and lower quantities, what happens to the measured elasticity? How would you explain that?
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