2. During the energy crisis of the 1970s, many economists predicted severe shortages in oil and other

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2. During the energy crisis of the 1970s, many economists predicted severe shortages in oil and other natural resources. These projections were based on trends that existed at that time. These projections showed consumption of oil increasing much faster than production, and indicated severe shortages by the mid-1990s. These shortages have not occurred. Explain why the projected shortages did not take place.

3. A. Suppose David never looks at the menu when he enters his favorite restaurant and always orders 2 eggs for breakfast. What is his price elasticity of demand for eggs? Explain.

B. Suppose Shelley enters a candy store daily and orders $2 worth of licorice. What is her price elasticity of demand for licorice? Explain