e. Marta increases her purchases of organic fruits and
vegetables from 40 kilos per year to 80 kilos per year as
her income rises from $60 000 to $69 000 per year.
f. When private school tuition fees increased from an
average of $17 500 per year to $22 500 per year, schools
recorded a drop in annual enrollment from 12 000
students to 8000 students.
15. Consider the following straight-line supply curves. In each case,
is the price (measured in dollars per unit) and is the quantity
supplied of the product (measured in thousands of units per
month).
i.
ii.
iii.
iv.
a. Plot each supply curve on a scale diagram. In each case,
plot point A (which corresponds to price equal to $20)
and point B (which corresponds to price equal to $40).
b. For each supply curve, compute the price elasticity of
supply between points A and B.
c. Explain why the slope of a supply curve is not the same as
the elasticity of supply.
16. Suppose a local government votes to impose an excise tax of
$1.00 per bottle on the sales of bottled water. (Assume that all
bottles are identical and residents cannot shop elsewhere.) Before
the tax, the equilibrium price and quantity are $1.00 and 2000
QSp= 2 QS
p= 4 QS
p= 5 QS
p= 10 QS