1. Explain why the demand for residential natural gas (gas used for heating , cooling and cooking) is more elastic than the
demand for residential electricity.
 
2. Suppose that the price of elasticity of demand for a campus film series is 1.40. If the objective of the film society is to maximize its total revenue (price times the umber of tickets sold), should it increase or decrease its price?

3. When the price of paper increases from 100$ per ton to 104$ per ton, the quantity supplied increased from 200 tons per day to 220 tons per day. What is the price elasticity supply? Compute it using both the initial value and mid point approaches.

4. Your city just announced a new rent-control program under which the maximum rent on apartments will be 20% below the equilibrium price. The price elasticity of supply of apartments is 0.5.

a. Use a supply-demand diagram to show the effects of rent-control program on the rental housing market. The initial price is 300$ and the initial quantity is 10.000. Label the initial equilibrium point with an i and the point that shows the quantity supplied under rent control with an s.

b. By what percentage will the quantity of apartments increase or decrease?

5. Suppose that the federal government is considering the eliminations of price supports for dairy products. Your job is to predict the effect of this change in policy on the quantity of dairy products consumed. The current minimum price support exceeds the market price by 20%. Here are the elasticities of demand forfor various dairy products

Fresh milk 0.63

Butter 0.73

Cheese 0.52

Cottage cheese 1.10

For each dairy product, predict the percentage change in consumption that would occur if dairy price supports were eliminated.