1. The purpose of this question is to assess your understanding of the concept of price elasticity of demand (Ed). Read and briefly summarize the following articles keeping in mind the formulas of price elasticity of demand (Ed) and the total revenue rule of elasticity (Exhibit 7, Chapter 7) as appropriate. Write out the formula for Ed, and the TR rule. Partially plug data into formulas when available. State whether D is elastic, inelastic or unitarily elastic and clearly state why. Answer the questions for each of the articles.
a. "E-Book Prices Rise, and Sales Suffer," pg. B-1, 9/4/15
b. "Amazon Plans $50 Tablet as Pricier Devices Struggle," pg. B-4, 9/8/15
c. "Diamond Prices Lose Their Shine," pg. C-10, 9/15/15
d. "At Disney, Park Price May Swing with the Seasons," pg. B-4, 10/5/15
e. "The $5 ATM Fee? It's Happening Now," pg. C-1, 10/5/15
f. "Price Increases Drive Drug Firm's Revenue," pg. A-1, 10/6/15
2. Follow the instructions below for the following article:
- Read and briefly summarize the following article and analyze which specific market or government failure is most prevalent from Chapter 5 and the Thumbnail Sketch in Chapter 6 of your text. What policy would you recommend to correct the problem?
"Victims of Tianjin Blast Protest of Compensation," pg. A-6, 9/18/15
- Use the S & D Model to graph the results of the failure relative to an efficient market solution for the article below illustrating external costs and the changes in P & Q. Be sure to identify your market and summarize your results. (See exhibits, Chapter 5.) If costs are not internalized, will the chemicals be over or under produced and priced?
You must create your own original graph: no copies from the text or other books or authors. You must "use" your graph in your answer to receive full credit. Summarize the results of your graph.
3. Summarize the article below then answer the question that follows.
"How the Birth Dearth Saps Economic Growth," pg. A-17, 9/24/15
- Is this article an example of a Public or Private failure? Specify which failure.
Use facts from the article, the "invisible hand concept" and "labor markets" to explain. What is the "failure?" Be specific.