Price

(dollars per CD)

Quantity demanded, 2009

(CDs per year)

Quantity demanded, 2010

(CDs per year)

4

40

70

8

30

50

12

20

30

16

10

10

18

5

0

20

0

0

1.

Cory enjoys listening to all types of music. His demand schedules for CDs in 2009 and 2010 are shown in the table above. Cory's income was $30,000 in 2009 and $35,000 in 2010.

In 2010, he bought an iPod so he started to download music files from the Internet.

a)Draw Cory's demand curves for CDs in 2009 and 2010. How did Cory's demand for CDs change? Why?

b)For each year, calculate Cory's price elasticity of demand as the price of CDs decreases from $16 to $12. (Use the midpoint method in your calculations.)

c)Why might the price elasticity of Cory's demand for CDs in 2010 be different from that in 2009?

d)If all CD buyers have the same demand as does Cory, what price should the record companies charge in 2010 to maximize their total revenue from CD sales?

2.What does a horizontal demand curve indicate about the price elasticity of demand?

Price

(dollars)

Quantity supplied

(units per week)

PES

A

100

120

B

80

100

C

60

80

D

40

60

E

20

40

3.

The table above gives the supply schedule for a product. Using the midpoint method, find the price elasticity of supply between points A and B, between B and C, between C and D, and between D and E.