1.    For each of thefollowing pairs of goods, which good is expected to have the moreprice elastic demand?

[i]    Milk [allbrands, grades] or President's Choice Cola [a generic brand ofcola]

[ii]   Cell phone usage ormatches

[iii] Restaurant meals or food[generally defined]

          [iv] Auto gas during the next 3 months or during the next 3years

2.    In the UnitedStates in 1916, the Ford Motor Company sold 500,000 Model T fordsat a price of $440. Henry Ford, the founder of the Ford MotorCompany, believed he could increase sales of the Model T by 40,000cars if he cut the price to $400.

[a] Use the provided information tocalculate the anticipated price elasticity of demand [PED] for theModel T Ford.   

[b] Based on your calculation in [a],did Henry Ford believe demand for the Model T was elastic orinelastic?

[c]   Based on yourcalculation in [a], if Henry Ford wished to increase total revenuefrom Model T sales, should he have increased or decreasedprice?

3.     [a] A recentstudy found that the cross-price elasticity of demand for marijuanaand beer is –

              0.63. In light of this result, are marijuana and beer complementsor substitutes?

        [b] The incomeelasticities of demand for movies and clothing have been estimatedto be +3.4

              and +0.5, respectively. What do the associated numerical valuesimply about the items?

4.    Which good do youexpect would you expect to have a smaller price elasticity ofsupply in the short term – baby-sitting services or rentalaccommodation?