1. Consider the following demand curve for apples. Price (in dollars),10,9,8,7,6,5,4 Quantity (in Bushels), 1,2,3,4,5,6,7 a) Find the price elasticity of demand between the prices $8 and $9. Is the demand curve elastic at this point? If so, why? If not, why not? What happens to revenue if the price falls from $10 to $9? Why? b) Repeat (a) when the prices are between $5 and $4.
2. Descriptive Exercise: Consider the following pairs of goods. Discuss which of them has a higher (in absolute value) elasticity and why. a) Oil in the short run versus oil in the long run. b) Food (as a whole product) versus vacations. c) Harry Potter novels versus other fantasy novels. d) Medicine versus chewing gum.