ECN-220 Module 3 Chapter 20 Problems 4, 5, 6, 11, and 12 in the textbook

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ECN-220 Module 3 Chapter 20 Problems 4, 5, 6, 11, and 12 in the textbook

Introduction to Economics - Demand

Grand Canyon University

Complete problems 4, 5, 6, 11, and 12 in the textbook.

Textbook: The Economy Today (13th Edition)

4.  Suppose consumers buy 30 million packs of cigarettes per month at a price of \$4 per pack.  If a \$1 tax is added to that price,

(a) By what percentage does price change? (Use the midpoint formula on p. 439.)

(b) By what percentage will cigarette sales decline in the short run? (See Table 20.1 for a clue.)

(c) According to Gary Becker, by how much will sales decline in the long run? (See the News, p. 443.)

5.  From Figure 20.1, compute (a) the price elasticity between each of the following points and (b) the total revenue at each point.     Page 438.

6.  If the price of a pack of cigarettes (including taxes) was \$4 before the 2009 tax hike (see the News, p. 441),

(a) What was the price after the tax hike?

(b) What was the (average) percentage increase in price?

(c) What was the price elasticity of demand?

11. Use the following data to illustrate the (a) demand curve and (b) total revenue curve:

(a) At what price is total revenue maximized?

(b) At that price what is the elasticity of demand?

(c) Between what prices is demand elastic?

12. On the graphs below, show the impact of the price reduction for iPhones, as described in the News on pages 441 and 447.

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