1.   For each of thefollowing pairs of goods, which good is expected to have the moreprice elastic demand?
[i]Â Â Â Milk [allbrands, grades] or President's Choice Cola [a generic brand ofcola]
[ii]Â Â Cell phone usage ormatches
[iii] Restaurant meals or food[generally defined]
          [iv] Auto gas during the next 3 months or during the next 3years
2.   In the UnitedStates in 1916, the Ford Motor Company sold 500,000 Model T fordsat a price of $440. Henry Ford, the founder of the Ford MotorCompany, believed he could increase sales of the Model T by 40,000cars if he cut the price to $400.
[a] Use the provided information tocalculate the anticipated price elasticity of demand [PED] for theModel T Ford. Â Â
[b] Based on your calculation in [a],did Henry Ford believe demand for the Model T was elastic orinelastic?
[c]Â Â Based on yourcalculation in [a], if Henry Ford wished to increase total revenuefrom Model T sales, should he have increased or decreasedprice?
3.    [a] A recentstudy found that the cross-price elasticity of demand for marijuanaand beer is –
              0.63. In light of this result, are marijuana and beer complementsor substitutes?
       [b] The incomeelasticities of demand for movies and clothing have been estimatedto be +3.4
              and +0.5, respectively. What do the associated numerical valuesimply about the items?
4.   Which good do youexpect would you expect to have a smaller price elasticity ofsupply in the short term – baby-sitting services or rentalaccommodation?
