A-2.1 Define demand elasticity.
Give formula. Defend your formula
by proving why it must not be an absolute measure and why
it
must be calculated at mid-point.
A-2.2 Explain the relationship between
elasticity of demand and
total revenue of a firm.
A-2.3 Define demand elasticity. Present graphically various
possible
values. Identify what determinants contribute to a given
elasticity value.
A-2.4 Define supply elasticity. Present in a graph various
possible
supply elasticity values. Identify the determinants of
supply elasticity.
A-2.5 Study the case of a price ceiling (such as rent control).
Show how elasticity is useful to predict future developments.
A-2.6 Study the case of a price support (such as farm prices).
Show
how elasticity is useful to predict future developments.
A-2.7 Use a graph to show how demand elasticity and supply
elasticity
are helpful to study the incidence of a sales tax. Comment
on
the effectiveness of revenue seeking and sumptuary taxes.
A-2.8 Empirical studies indicate the following demand elasticities:
.25 for food and beverages, 3.2 for luxury automobiles,
.10 for
housing, 2.2 for Goodyear tires, and .35 for medical care.
Using demand elasticity determinants, explain the reason
for
these figures.