Q. 1. A study sponsored by the American Medical Association suggests that the absolute value of the price elasticity of demand for surgical procedures is smaller than that for the own price elasticity for office visits. Explain why this would be expected. Hint: relate your answer to the 2 major things that affect elasticity - availability of substitutes also time.

2. Assume the monthly demand for soda by a consumer is given by Q = 10 - 8P.

a. If the price of soda is $1 every can, Elucidate how many sodas will the consumer purchase in a typical month?

b. Illustrate what is the elasticity of demand for soda?

c. Interpret the elasticity the way we learned in class.

3. The demand function for VCRs has been estimated to be Qv = 134 - 1.07Pt + 46Pm - 2.1Pv - 5M, where Qv is the quantity of DVD players, Pt is the price of a DVD, Pm is the price of a theater movie ticket, Pv is the price of a DVD player also M is income. Based on this information, answer the subsequent questions.

a. Are DVD player's normal or inferior goods?

b. Are theater movies substitutes or complements for DVD players?

c. Illustrate what additional information is needed for you to be able to compute the price elasticity of demand for DVD players?