Question

Short Answer 1. When the price of Kit Kats rises by 20 percent, Matt reduces the amount of Kit Kats he eats from 10 to 9. Calculate the elasticity for Kit Kats. Are Kit Kats elastic or inelastic? Why? 2. If the price of chocolate increases by 20 percent and the total revenue generated from the sale of chocolate rises even though quantity does not fall, what can be said about the elasticity of chocolate given this information? 3. Explain why many economists feel the "war on drugs" during the 1980s was an unsuccessful economic and social policy. 4. Recently several states (including Illinois) have passed a "junk food tax" on addictive sugary foods and drinks. Lawmakers have stated the tax will help combat the growing childhood obesity issue in the U.S. Comment on the validity of this claim, using at least one graph to back up your claim. Math/Graphs with elasticity effects 1. Given the demand function Qd--3P +40 and the supply function Qs 4P, mathematically determine the amount of total revenue this firm will make when it sells it's good at market price. 2. Using the demand function, Qd-4P +200, determine elasticity when price falls from $25 and $20 using both the midpoint (arc elasticity) formula and point to point formula. For extra practice repeat the above for a price decrease from $10 to $8 3. Hypothetically assume the demand for cancer therapy drugs are perfectly inelastic. Show using supply and demand analysis the result of additional governmental regulation that increases the production cost of these drugs. 4. Graphically show the market for adult purchases of movie tickets when new movie trailers make people really want to see the movie. 5. Graphically show the effect on the market for major league baseball games if fans are excited to see a winning team.

please answer all don't understand

Answer 1

1.

Change in P = 20%

Change in Qd = (9-10)/10 = -10%

Elasticity = % change in Q / % change in P

Elasticity = -10/20

Elasticity = -0.5

Since the value is less than 1, it means demand is inelastic in nature

2.

It means demand for chocolates is inelastic, since a rise in price did not less demand fall, leading to an increase in total revenue

3.

The war on drugs was an unsuccessful policy because the drugs have an inelastic demand because of its addictive nature. As a result, any price increase or war on drugs would not reduce its demand much, making the policy an unsuccessful attempt.

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