1. What is the most that you would be willing to pay (in dollars) to hear Sacha Baron Cohen (Borat) give a live performance in Campbell Hall?

2. The supply curve for a good is vertical. A natural disaster reduces the supply by 20 %. The elasticity of demand is –0.5. By what percent must price rise to restore equilibrium? A)50 percent B)40 percent C)100 percent D)20 percent E)25 percent

3. Q P Quantity falls by 20% If price rises by 40%, then elasticity is -20/40=-.5

4. Elasticity tricks. Note that the definition of elasticity is an equation of the form E=A/B where A is percent change in Quantity and B is percent change in Price. If we know any two of these variables, we can always calculate the third.

5. In our previous example: We are told that E=-0.5. We are told that A=( % change in quantity) = –20 We need to solve for B= (% change in price). Since by definition E=A/B We have –0.5=-20 /B. We solve this equation to find B=40.

6. The supply curve is horizontal at $10. If the supply curve shifts downward to $5 and if the price elasticity of demand is -1.5, then equilibrium sales increase by 1. 100% 2.50% 3.75% 4.25%

7. $10 $5 P Q Price falls by 50%, from $10 to $5. If price elasticity is 1.5, then (% change in quantity) divided by (% change in price) =-1.5. So % change in quantity =75. Supply curve shifts down.

8. If the demand for bananas is elastic and half the banana crop is destroyed by a hurricane A)The price of bananas rises and total revenue falls. B)The price of bananas rises and total revenue rises. C)Price and quantity both fall.

9. If the demand for bananas is inelastic and the size of the banana crop increases A)Total revenue of banana producers will rise. B)Total revenue of banana producers will fall.

10. How are the clickers doing today? A)I had no problems. B)One time when I tried to answer a question, I was unable to do so because the clicker wouldn’t accept my answer. C) More than on time when I tried to answer a question, I was unable to do so because the clicker wouldn’t accept my answer.

11. Up and in If the supply curve slopes upwards, what does it mean for the supply curve to “shift up” and is that different from “shift in”?

12. Shifting up and shifting in

13. Up not in

14. In not up

15. And on to our main lecture