1 – If the government decided to impose a 50% tax on gray t-shirts, would this policy generate a large or small increase in revenues?  Use elasticity to explain your answer.

2 – College logo t-shirts priced at $15 sell at a rate of 25 per week, but when the bookstore marks them down to $10, it finds that it can sell 50 t-shirts per week.  What is the price elasticity of demand for the logo t-shirts?

3 – Search YouTube for the video titled “Black Friday 2006-Best Buy Line.”  Do the early shoppers appear to have elastic or inelastic demand on Black Friday?  Explain your response.

4 – If a 20% increase in price causes a 10% drop in the quantity demanded, is the price elasticity of demand for this good elastic, unitary, or inelastic?

5 – Characterize each of the following goods as perfectly elastic, relatively elastic, relatively inelastic, or perfectly inelastic.

a.       A lifesaving medication

b.      Photocopies at a copy shop, when all competing shops charge 10 cents per copy

c.       A fast-food restaurant located in the food court of a shopping mall

d.      The water bill you pay

6 – A local paintball business receives total revenue of $8,000 a month when it charges $10 per person and $9,600 in total revenue when it charges $6 per person.  Over that range of prices, does the business face elastic, unitary, or inelastic demand?

7 – Do customers who visit convenience stores at 3 am have a price elasticity of demand that is more or less elastic then those who visit at 3 pm?

8 – A worker gets a 25% raise.  As a result, he decides to eat out twice as much as before and cut back on the number of frozen lasagna dinners from once a week to once every other week.  Determine the income elasticity of demand for eating out and for having frozen lasagna dinners.