Name:_______________ Assignment-Elasticity

1. Based on the determinants of elasticity as discussed in the text, guess what the price elasticity of demand of the following products would
be (elastic or inelastic?) and state which determinant supports your guess.
(a) ballpoint pens
(b) Crest toothpaste
(c) diamond rings
(d) sugar
(e) refrigerators.
2. Use the information in the table below to identify the type of cross elasticity relationship between products X and Y and whether demand
is cross elastic or cross inelastic in each of the following five cases, A to E.

3. Use the information in the table below to identify the income elasticity type of each of the following products, A to E.

4. For the following goods, would you expect them to have price elasticities of demand greater or less than 1? Place the good in the
table accordingly.
5.
 Goods Elastic (> 1) Inelastic (< 1)

Fur coats Bread Watches

Smart phones Food Household
pets Pens
Bottled water Shampoo
University textbooks Cigars
Cigarettes Holidays
Restaurant meals Socks
Sports cars Newspapers
Reading glasses Tea
Instant coffee Sugar
Starbucks coffee

5. For the following goods, arrange them in order of their elasticity of supply:
City center apartments /pencils/ oil /paperback /books /Coca Cola /Real Madrid tickets /Brain surgery
Think carefully about how you will justify your decisions.

Most Elastic → → Least Elastic

6. The following table shows the cross price elasticities for several goods:

Good 1 Good 2 Cross Price Elasticity of Demand

Air conditioning units Kilowatts of electricity - 0.34

Coke Pepsi + 0.63

High fuel-consumption SUVs Gasoline - 0.28

McDonald’s burgers Burger King burgers + 0.82

Butter Margarine + 1.54

a) Explain the sign of each of the cross price elasticities and state what it says about the relationship between the two goods.

b) Note the difference in size between the cross price elasticities for the two types of burgers and the butter and margarine. Why is the elasticity so
much higher for butter and margarine do you think?

c) What would a 5% increase in the price of Pepsi do to the amount of Coke demanded?

d) How would a 10% decrease in the price of gasoline affect the quantity of SUVs demanded?