Assignment: Demand, Supply, and Elasticity

QUESTION 1 - The band Atomic Rooster has gotten back together and recorded a new album, "Home To Roost."  Below is demand and supply information at different prices for downloads:

PRICE          DEMAND     SUPPLY$2                    550                50           4                     450              150 6                     350               250 8                     250               35010                    150               45012                      50               550

A) Using excel or done neatly by hand, draw demand and supply curves using the information above.

B) Label and state the equilibrium point and explain what it means.

C) If the demand curve shifts up, what could cause that? If it moves down?

D) If the supply curve shifts to the left, what could cause that? It it shifts to the right?

E) How would supply and demand change if the government set a price floor $5 above the equilibrium price?

F) How would supply and demand change if the government set a price ceiling $4 below the equilibrium price?

QUESTION 2 - A) Independent of #1 above, Atomic Rooster sets a unit sales price of $8 and customers purchase 1,000 copies. Then they raise the price to $10 and customers purchase 600 copies. Calculate the elasticity of demand (show your work), then explain what it means and whether or not this change is compatible with their goal of maximizing revenue.

B) Starting with the same $8 unit sales price and sales of 1,000 units, say the band instead drops the price to $7 and sales rise to 1,300 units. Calculate the elasticity of demand (show your work), then explain what it means and whether or not this change is compatible with their goal of maximizing revenue.This assignment is to be submitted by 3/17.