Supply and Demand and Price Elasticity
Please answer the following questions:
1.Given two parallel, downward- sloping, linear demand curves, is the demand elasticity the same at any given price? Given two downward- sloping, linear demand curves, with one showing consumption to be 50 percent greater than the other demand curve at each price, is the demand elasticity the same at any given price?
2. A few years ago, the bidding for a human kidney offered on the internet auction site Ebay hit $5.7 million before the company put a stop to it citing a federal law that makes it illegal to sell one’s own organs. Using a supply and demand graph, explain this bidding phenomenon given that the federal law mandates a price of zero for the sale of the body organs.
3. Some opponents of the death penalty are opposed to executing individuals who have been convicted of murder because they believe that murder is an irrational act and that raising the price of murder through capital punishment thus will not have a deterrent effect on prospective murders. If these opponents are correct in their view of murder being an irrational act, depict what the demand curve for murders look like. What is the price elasticity of demand for murder according to this view?
4. In an antitrust case brought by the justice department against microsoft, explain why the cross price elasticity of demand between rival operating systems such as Linux and microsoft’s own MS-DOS system might have been of interest in determining microsoft’s ability to control the prevailing price in the operating system market.
5. If a cable operator estimates basic tier demand elasticity to equal unity, will profit be increased by raising rates? Explain. How about if the basic tier demand elasticity is estimated to exceed unity? Explain.
6. Consider the case of shopping for a Valentine’s Day present. What is likely to be your price elasticity of demand the less time you leave to shop for the present in advance of Valentine’s Day, everything else being equal? Explain.
7. In a recent year, close to 30 percent of all flights into and out of New York City’s John F. Kennedy International Airport experienced delays. Explain how this phenomenon is related to a federal decision to remove the limit, in 2007, on the number of arrivals and departures between 3 p.m. and 8 p.m. and the unwillingness to rely on prices to ensure that the quantity supplied of runaway capacity equals quantity demanded at any given point in time. Are passengers better off under a system in which airlines are charged landing/ takeoff fees at Kennedy that are often below equilibrium levels?
8. A show by U2 in NYC area was an instant sellout due to major purchasing of tickets by Ticketmaster. Just as quickly, however, thousands of ticket listings started appearing on TicketsNow.com, a Ticketmaster subsidiary, where fans and brokers flip tickets, often at prices gar above face value. For example, one $253 face-value ticket for a seat near the stage was listed for $10,000. The state of New York’s anti- scalping laws were suspended in 2007. Should they be reinstated to prevent such “consumer rip-offs”, as they have been termed by certain policymakers who also believe that there is no benefit to consumers from allowing tickets to most large events to be resold at any price?
9. In August 2013, after contentious debate in Congress, President Obama signed into law a bill restoring lower interest rates for college student loans. President obama pledged that the hard-fought compromise with legislative representatives would be just the first step in a broader, concerted fight to reign in the cost of a college education. Evaluate the validity of the president’s statement and whether government-subsidized lower interest rates for student loans reduce or increase the cost of college education.