Questions

All exercises are available on MyEconLab; * = [&|eq|&] answer at the back of this book; C = [&|eq|&] use of calculus may be necessary.

1. Elasticity  

  1. 1.1 The U.S. Tobacco Settlement between the major tobacco companies and 46 states caused the price of cigarettes to jump 45¢ (21%) in November 1998. Levy and Meara (2005) found only a 2.65% drop in prenatal smoking 15 months later. What is the elasticity of demand for this group?

  2. 1.2 When Apple raised the price of iTunes from 99¢ to $1.29, GS Boyz’s “Stanky Legg” sales dropped from 22,686 units to 19,692 units (Glenn Peoples, “iTunes Price Change: Sales Down, Revenue Up in Week 1,” Billboard, April 15, 2009). What was the song’s arc elasticity of demand? (Hint: See Q&A 3.1 .)

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