The supply of paintings by Leonardo Da Vinci, who painted the Mona Lisa and The Last Supper and died in 1519, is highly inelastic. Sketch a supply and demand diagram, paying attention to the appropriate elasticities, to illustrate that demand for these paintings will determine the price.
A city has built a bridge over a river, and it decides to charge a toll to everyone who crosses. For one year, the city charges a variety of different tolls and records information on how many drivers cross the bridge. The city thus gathers information about elasticity of demand. If the city wishes to raise as much revenue as possible from the tolls, will the city decide to charge a toll in the inelastic portion of the demand curve? If not, why not? Will the city decide to charge a toll in the unitary portion of the demand curve? If not, why not? Will the city decide to charge a toll in the elastic portion of the demand curve? If not, why not?
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? Sketch supply and demand diagrams to illustrate your answer.
Consumer demand for oil - including oil in the form of both gasoline and home heating oil-is fairly inelastic in the short run and more elastic in the long run. In the short run, will a shift in the supply of oil (say, caused by a disruption in Mideast production) affect price or quantity more? What about in the long run? Illustrate your answer with the appropriate diagrams.