(Solved): 1. Elasticity a. Calculate elasticity of demand. Show the formula and how you substituted in the nu ...

1. Elasticity a. Calculate elasticity of demand. Show the formula and how you substituted in the numbers, then do the calculation b. Is demand elastic or inelastic over the price range? How did you know? c. Interpret the number that you calculated. (This was covered in lecture and in notes.) Be specific about the relationship between price and quantity demanded. d. If the business lowers its price over this price range, will total revenue rise or fall? Use the concept of elasticity to explain your answer. ii. Provide an example and explain how your example fits the definition. iii. Explain carbon markets (sometimes referred to as cap and trade). That is, how do they work and how do they help deal with negative extemalities. iv. What is another method that the government could use to control negative externalities? c. Positive externalities i. Define positive extemalities ii. Provide an example and explain how it fits the definition. iii. Explain how the school vouchers are used to address positive externalities. iv. Do you believe that vouchers would improve educational outcomes in the US? Why or why not? 3. Public goods a. What is the definition of a public good? b. Name and explain an example of a public good. c. If a product fits the definition of a public good, then economist argue that it is better for the government to produce and distribute the product/service. Explain this statement. 4. Shortage/Surplus: (Use graph 1) a. What is the price at equilibrium? b. What is the quantity that will be bought and sold at equilibrium? c. What is the price that the government set for the market? d. What is the quantity demanded at the govemment price? e. What is the quantity supplied at the government price? f. At the government price there exists a... surplus OR shortage g. Explain your answer to part \( \mathrm{f} \). h. If the government removes the set price, then the price in this market will... Rise. Or. Fall. 5. Shifts in supply/demand (Graph 2) a. The line that is moving is: supply demand b. Is the graph... Increasing (expanding). OR Decreasing (contracting) c. What will be true of the price and quantity at the new equilibrium? d. Name and explain an example that would be appropriate for this graph. Be specific. 6. Shifts in supply/demand (Graph 3) a. The line that is moving is: supply demand: b. Is the graph.. Increasing (expanding). OR Decreasing (contracting) c. What will be true of the price and quantity at the new equilibrium? d. Name and explain an example that would be appropriate for this graph. Be specific.