P (S/visit) elastic Inelastic region Q(visitors per day) 4. The price elasticity of a good generally increases with the number of substitutes it has. It is easier to substitute a Ford or Toyota for a Chevrolet than it is to substitute a motorcycle or a skateboard for a car. Thus the market demand curve for cars is likely to be less elastic with respect to price than the market demand curve for Chevrolets 5. The more income a person has, the smaller a given expend iture will be as a proportion of her overall budget, and hence the less likely she will be to respond dramatically to a price change. Thus senior executives, the most highly paid of the three groups, should have the least price-elastic demand curves. Students, the least well paid, should have the most price-elastic demand curves 6. The cross-price elasticity is(percent change in Qsyrup/percent change in Pmilk)=-4/2 -2. Since this cross elasticity is negative, the two are complements 7. The expression for supply elasticity is(P/Q)x(1/slope). Since the slope of this supply curve is AP/AQ= 2/3, the elasticity of supply at A is(4/9)x(3/2 F2/3. The elasticity at B is(6/12)x (3/2)3/4 △P 912 8. The inputs required to produce each slice of pizza cost a total of $1.20, and this marginal cost is constant. The supply curve of pizza is thus a horizontal line at PP ($/visit) Q (visitors per day) 6 12 3 6 elastic region inelastic region 4. The price elasticity of a good generally increases with the number of substitutes it has. It is easier to substitute a Ford or Toyota for a Chevrolet than it is to substitute a motorcycle or a skateboard for a car. Thus the market demand curve for cars is likely to be less elastic with respect to price than the market demand curve for Chevrolets. 5. The more income a person has, the smaller a given expenditure will be as a proportion of her overall budget, and hence the less likely she will be to respond dramatically to a price change. Thus senior executives, the most highly paid of the three groups, should have the least price-elastic demand curves. Students, the least well paid, should have the most price-elastic demand curves. 6. The cross-price elasticity is (percent change in Qsyrup/percent change in Pmilk) = -4/2 = -2. Since this cross elasticity is negative, the two are complements. 7. The expression for supply elasticity is (P/Q)x(1/slope). Since the slope of this supply curve is P/Q = 2/3, the elasticity of supply at A is (4/9)x(3/2)=2/3. The elasticity at B is (6/12)x(3/2)=3/4. Price 6 A Quantity 9 12 4 B Q P S 8. The inputs required to produce each slice of pizza cost a total of $1.20, and this marginal cost is constant. The supply curve of pizza is thus a horizontal line at P =