Problem set #3 Elasticity GEach question is worth 4 pointsQuestion 1A newspaper recently lowered its price from 50 cents to 30 cents. As it did, the number ofnewspapers it sold increased from 240,000...

Problem set #3 Elasticity GEach question is worth 4 pointsQuestion 1A newspaper recently lowered its price from 50 cents to 30 cents. As it did, the number ofnewspapers it sold increased from 240,000 to 280,000.i)Over this price range what was the elasticity of demand for this newspaper?-.31What was the degree of elasticity for the newspaper? inelasticA 1% change in the price of the newpaper led to a change in quantitydemanded of _.31 decrease_____?What happened the newspaper’s total revenue as it dropped its price?decreasesii)iii)iv)Question 2Use the points on the graph below to answer the following questions.P20 X15 A10BYD10i)ii)iii)iv)1020D23040QtyWhat is Ep along D1 (from A to B)? 93,15), (12,10) -3.35What is the Ep along D2 (from X to Y)? (3,20), (22,10) -2.30What are the slopes of Demand curves D1 and D2? -3.35 and -2.30What can you say about the slopes and the elasticities of these demandcurves? They’re the same.Question 3Economists estimate the short run elasticity of demand for a Chipotle burrito is -2.25.i)ii)iii)iv)What degree of elasticity does Chipotle burritos exhibit? elasticA 1% change in the price of Chipotle burritos would do what to the quantitydemanded of Chipotle burritos? Decrease 2.25 percentWhat would happen if Chipotle lowered its burrito price by 2% to its sales(numeric answer)? Decrease 4.5 percentWhat happens to Chipotle’s total revenue if it were to lower its price by 2%?increasesQuestion 4Due to the recent downturn in economic activity, Taz, has seen his hours at work reduced.He used to work 30 hours a week at $13 and hour, but now he works 22 hours.Due to this change he noticed he purchased more boxed Macaroni and Cheese, up from 1box a week to 4. He also reduced his purchase of Coke from 2 12-packs to 1 12-pack perweek.i)What is the income elasticity of macaroni and cheese for Taz? -11.11ii)What type of good is Macaroni and cheese for Taz? inferioriii)What is the income elasticity of Coke for Taz? 1.85iv)What type of good is Coke for Taz? Normal or superiorQuestion 5Syesha loves to eat Sunday breakfast at her local Scrambles restaurant. She usually ordersa la carte. Her usual breakfast consists of 2 scrambled eggs, 1 piece of bacon and 2 linksof sausage. The price of an egg, a sausage link and a piece of bacon are all $1. Thus herbreakfast has a price of $5.Scramble restaurant changes the price of eggs to $1.50. She now orders the following forher breakfast:1 scrambled egg, 2 pieces of bacon and 1 sausage link.i)ii)iii)iv)Calculate the cross price elasticity of eggs and sausage. 1What type of relationship is there between eggs and sausage? substituteCalculate the cross price elasticity of eggs and bacon? -.5What type of relationship is there between eggs and bacon? complement