Chapter 6, Question 7

Chapter 4, Question 13

S

A.) The supply usually increases as the price increases, although in this case, the supply remains constant. The supply would be considered to be completely inelastic because there are a fixed number of seats.

B.) The equilibrium price is $8.00 and the equilibrium quantity is 8000 tickets.

C.) New equilibrium price is $12.00 and the new equilibrium quantity is 8000.

Price	Old Qty Demanded	New Qty Demanded	Quantity Supplied
$ 4.00
$ 8.00
$ 12.00
$ 16.00
$ 20.00

Chapter 5 Questions 2 and 11

2)

= 0.23

A.) Business Travelers:
(1900-2000)/[(1900+2000)/2]
(250-200)/[(250+200)/2]
Vacationers:

B.) The business travelers have a set time that they have to travel where as the vacationers can chose their travel dates more freely.

11)

A.) The price should increase by $1.00 to reduce the demand of cigarettes by 20%.

X=50%

B.) In the short-run (1 year) the policy will have a less significant effect, although in the long-run (5 years) it will have a more significant effect. In most markets, supply is more elastic in the long run than in the short run because elasticity often depends on the time horizon under consideration.

C.) This might be due to the simple fact that teenagers have less disposable income than adults do.

Chapter 6, Question 7

(Equilibrium 1 is without the tax and equilibrium 2 is with the tax)

Congress and the president should impose tax on consumers, as it is shown on diagram, the demand curve shifts down and leftward by $0.50, thus making the tax effective at reducing gas consumption.

B.) As you can see, if the demand curve is more elastic which in turn makes the tax more effective.

(Equilibrium 1 is without the tax and equilibrium 2 is with the tax)

C.) Consumers of gasoline are hurt because of this tax. The reasons are that, the price increases and the consumers do not have substitutes or alternatives to gasoline (in the short run). In the long run, consumers can buy electric cars.

D.) Workers in the oil industry will be hurt by this tax. Since the market demand is reduced, the workers will not sell as much.

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