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Econ 1 Assignment 4

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1-) (Categories of Price Elasticity of Demand) For each of the following absolute values of price elasticity of demand, indicate whether demand is elastic, inelastic, perfectly elastic, perfectly inelastic, or unit elastic. In addition, determine what would happen to total revenue if a firm raised its price in each elasticity range identified.
 a) ED = 2.5:elastic b) ED = 0.8:inelastic
2-) (Price Elasticity of Supply) Calculate the price elasticity of supply for each of the following combinations of price and quantity supplied. In each case, determine whether supply is elastic, inelastic, perfectly elastic, perfectly inelastic, or unit elastic in each case. Please give details to your numeric answers.

a) Price falls from $2.25 to $1.75; quantity supplied falls from 600 units to 400 units. 200/600= 1/3=33.3/22.2=.667
b) Price falls from $2.25 to $1.75; quantity supplied falls from 600 units to 500 units.
100/600=.1667 / 2.25/1.75=.757
3-) Consider the following pairs of goods. Which would you expect to have the more elastic demand? Why?

a) water or diamonds=water
b) insulin or nasal decongestant spray=insulin

c) food in general or breakfast cereal=food
d) gasoline over the course of a week or gasoline over the course of a year

= week
4-) Outsourcing Inpatient Care to India The Wall Street Journal, Monday April 26, 2004.
Global health care has arrived. During 2003, Canadian resident Terry Salo flew to India to have his hip replaced. He paid only a quarter of the cost of similar treatments in the U.S. and shaved a year off his waiting time for free care in Canada. The very satisfied Mr. Salo played golf a month later.
Mr. Salo is not alone. Sixty thousand foreign patients flocked to India’s Apollo Hospitals to obtain cheaper and quicker medical care than was available in their home countries. Apollo, founded in 1983 as a single

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