1 Emporia State University

School of Business
Spring 2022
BC 807 OA
Homework 3 Total Points = 25

Homework 3 is due on Sunday, April 10th by 11:59 pm (Central Time). No extensions will be
granted. The class website on Canvas will stop accepting homeworks at 12:00 am on Monday,
April 11.

All homeworks must be uploaded to Canvas using the procedure described on the website (and
in the course syllabus). This is the ONLY way in which homeworks may be submitted.
Homeworks SHOULD NOT be sent by email, handed to the department secretary or
anyone else in the department office, left in my mailbox at the department office, slid under
my door or left outside my office (if you submit your homework through any of these methods,
I will not grade it and you will get a grade of zero for that homework).

The file containing your answers should be typed in Microsoft Word and the file name
MUST be “Homework3.YourName.docx” where YourName is your name (eg. JohnSmith)
(eg. Homework3.JohnSmith.docx).

You may use Google Docs to prepare your homework, but please upload the actual document
and DO NOT just send me a link to the document. You may also submit a PDF document with
your answers.

You should type all answers. Equations and graphs may be written/drawn by hand and then
scanned into your document. While you may discuss the homework with others, you should
write the answers by yourself. If two students submit identical (or largely similar answers) both
students will get zero points. Further penalties may apply.

All answers MUST be included in one file, even if you have to scan graphs or equations. It
is possible to include scanned images in Word documents, and they certainly can be included in
PDF documents. Please DO NOT submit multiple files with your answers.

Your answers must not be copied out of the textbook or from anywhere else, including the
internet. Copied assignments will be subject to sanctions, up to and including an administrative
withdrawal from the class.
1. (5 points)

A
B

(a) What is the price elasticity of demand at point B? Please show your calculations.
(b) What is the arc elasticity of demand between point B and point C? Please show your
calculations.
1 Price
Price elasticity at a point is ×
slope Quantity

( )
Q2−Q1
(Q2 +Q1 )/2
Arc Price elasticity=
¿¿
(For Arc elasticity see the above formula and the formula on page 83 in “Inside Business 3-2)

2. (5 points) Currently people are concerned about the recent increase in the price of gasoline.
After the price of gasoline rises, consumers will still have to drive to work or drive to school and
drive to many other places and the distance they have to drive will not change and in many cases
public transport is not an option. What does this tell you about the price elasticity of demand for
gasoline (elastic or inelastic)? Please explain.

3. (5 points) If the United States goes into a recession and income of consumers drops, will
sellers of normal or inferior goods (or both) benefit from the recession? Do not consider a change
in any factor other than income. Please give an explanation.
4. (10 points) Assume that the demand for cosmetic or plastic surgery is price inelastic but
not equal to zero and that plastic surgery follows the law of demand. Are the following
statements true or false? Please give an explanation in each case.
a. When the price of plastic surgery increases, the number of operations decreases_
b. The percentage change in the price of plastic surgery is less than the percentage change in
quantity demanded.
c. Changes in the price of plastic surgery do not affect the number of operations.
d. Quantity demanded is quite responsive to changes in price.
e. If more plastic surgery is performed as a result of a fall in price of plastic surgery, total
expenditure on plastic surgery will decrease