Answer the following Questions. Your answers must have complete explanations to receive credit: 1. (Elasticity): Consider the following demand schedule: Price Quantity Demanded $12 5 $10 10 $5 20 $3 30 a. Use the midpoint formula to calculate the elasticity of demand as the price rises from: i. $3 to $5 ii. $5 to $10 iii. $10 to $12 b. When the price rises from $3 to $5, does consumer expenditure rise, fall or stay the same? What about when price rises from $5 to $10? When price rises from $10 to $12? c. Why should you have anticipated your answers to (b) after you answered (a)? 2. (International Trade and Elasticity): Consider a country that imports a good from abroad. For each of the following statements, state whether it is true or false. Explain your answers. a. "The greater the elasticity of demand, the greater the gains from trade." b. "If demand is perfectly inelastic, there are no gains from trade." c. "If demand is perfectly inelastic, consumers do not benefit from trade."
Answer the following Questions. Your answers must have complete explanations to receive credit:
1. (Elasticity): Consider the following
| Quantity Demanded | |
| $12 | 5 |
| $10 | 10 |
| $5 | 20 |
| $3 | 30 |
a. Use the midpoint formula to calculate the
i. $3 to $5
ii. $5 to $10
iii. $10 to $12
b. When the price rises from $3 to $5, does consumer expenditure rise, fall or stay the same? What about when price rises from $5 to $10? When price rises from $10 to $12?
c. Why should you have anticipated your answers to (b) after you answered (a)?
2. (International Trade and Elasticity): Consider a country that imports a good from abroad. For each of the following statements, state whether it is true or false. Explain your answers.
a. "The greater the elasticity of demand, the greater the
b. "If demand is perfectly inelastic, there are no gains from trade."
c. "If demand is perfectly inelastic, consumers do not benefit from trade."
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