Question: Problem 7: (5+ 5 Points) a. Governments impose excise taxes on goods that have inelastic demand, such as cigarettes, more often than in other cases.

Problem 7: (5+ 5 Points) a. Governments impose excise taxes on

Problem 7: (5+ 5 Points) a. Governments impose excise taxes on goods that have inelastic demand, such as cigarettes, more often than in other cases. Why? b. In 2013, the price of corn fell and some corn farmers switched from growing corn in 2014 to growing soybeans. i. Does this effect illustrate the law of demand or the law of supply? Explain your answer. ii. Why would a corn farmer grow soybeans? Problem 8: (10 Points) The demand curve for sneakers is QD = 500 - 12 P. a. Calculate the (point) price elasticity of demand when price is $100. Is demand elastic or inelastic? b. Calculate the (point) price elasticity of demand when price is $700. Is demand elastic or inelastic? Problem 9: (10 Points) The initial price of a cup of coffee is $1, and at that price, 400 cups are demanded. If the price falls to $0.90, the quantity demanded will increase to 500. a. Calculate the (arc) price elasticity of demand for coffee

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