Assignment 2

Please submit your answers properly labeled, in order, in one Word document.

1. a. Using the data from Assignment 1 (also shown in the table below), calculate the elasticity of demand and elasticity of supply at each price change in the market for movie tickets using the midpoint formula for both supply and demand. (3 marks)

Price

Quantity Demanded

Elasticity of Demand

Quantity Supplied

Elasticity of Supply

$5

350,000

10,000

$8

250,000

20,000

$10

150,000

50,000

$13

125,000

85,000

$15

110,000

110,000

$18

80,000

150,000

$20

45,000

300,000

$25

25,000

350,000

b. Based on your elasticity calculation, if the price of movie tickets rises from $13 to $15 will total revenue go up or down? By how much? You need to answer the first part of this question using the elasticity of demand at this point. (2 marks)

2. Define the following terms and provide a new example of each (not the one in the textbook). (2 marks)

a. Deadweight losses

b. Free-rider problem

3. Data on two individuals’ preferences for a public good are reflected in the table below. PA and PB represent the prices individuals A and B, the only two people in the society, are willing to pay for an extra unit of a public good, rather than do without.

Please submit your answers properly labeled, in order, in one Word document.

1. a. Using the data from Assignment 1 (also shown in the table below), calculate the elasticity of demand and elasticity of supply at each price change in the market for movie tickets using the midpoint formula for both supply and demand. (3 marks)

Price

Quantity Demanded

Elasticity of Demand

Quantity Supplied

Elasticity of Supply

$5

350,000

10,000

$8

250,000

20,000

$10

150,000

50,000

$13

125,000

85,000

$15

110,000

110,000

$18

80,000

150,000

$20

45,000

300,000

$25

25,000

350,000

b. Based on your elasticity calculation, if the price of movie tickets rises from $13 to $15 will total revenue go up or down? By how much? You need to answer the first part of this question using the elasticity of demand at this point. (2 marks)

2. Define the following terms and provide a new example of each (not the one in the textbook). (2 marks)

a. Deadweight losses

b. Free-rider problem

3. Data on two individuals’ preferences for a public good are reflected in the table below. PA and PB represent the prices individuals A and B, the only two people in the society, are willing to pay for an extra unit of a public good, rather than do without.