1. Assume that the elasticity of demand for chewing tobacco is 0.70 and the elasticity of supply is 2.30. Suppose an antichewing campaign decreases the demand for chewing tobacco by 18 percent. The equilibrium price of chewing tobacco will _________ (decrease/increase) by _________ percent.
2. Suppose the elasticity of demand for motel rooms is 1.0 and the elasticity of supply is 0.50. If the demand for motel rooms increases by 15 percent, the equilibrium price of motel rooms will _________ (decrease/ increase) by _________ percent.
3. Suppose that the percentage change in demand is 20 percent, the price elasticity of demand is 3.0, and the price elasticity of supply is 2.0. The percentage change in the equilibrium price is _________.
4. Suppose the price elasticity of demand for accordions is 2.0 and the supply elasticity is 3.0. If a subsidy on accordions increases supply by 20 percent, the equilibrium price will _________ (decrease/increase) by _________ percent.
5. In the case of the broken gasoline pipeline, the decrease in supply and the resulting increase in price caused a decrease in _________ and an increase in _________. (Related to Application 6 on page 455.)
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