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5. If the demand curve is a straight line having negative slope (i.e., increasing quantity as price decreases), then draw or describe the shape of its curve for price elasticity of demand:
5. If the demand curve is a straight line having negative slope (i.e., increasing quantity as price decreases), then draw or describe the shape of its curve for price elasticity of demand:
'''The point here is that the price elasticity of demand changes depending on where you are on the straight-line curve, because price elasticity is a ratio of the percent change in quantity demanded to a percent change in price.'''
6. Describe what a negative income elasticity of demand means. Give an example of a good or service that might have a negative income elasticity of demand.
6. Describe what a negative income elasticity of demand means. Give an example of a good or service that might have a negative income elasticity of demand.
'''Negative income elasticity of demand refers to a good whose demand becomes less as people's income goes up. That is because it is a good that is a cheaper version of something. An example of a good that has a negative income elasticity of demand is generic drugs. As people’s income goes up, they will be more willing to pay extra for the brand name drugs. However, it is true that people are forced to pay for the brand name drugs until the original patent runs out.''' (thanks to Kevin for that)
Honors:
Honors:
7. Suppose the demand for a special type of colored corn is inelastic. Suppose there was a disease that uniformly killed 20% of all the cornstalks, but did not affect demand at all (i.e., the public was not scared by the disease). Explain if corn farmers are better or worse off due to the disease, and why.
7. Suppose the demand for a special type of colored corn is inelastic. Suppose there was a disease that uniformly killed 20% of all the cornstalks, but did not affect demand at all (i.e., the public was not scared by the disease). Explain if corn farmers are better or worse off due to the disease, and why.
'''Farmers are better off, because the price increases and so do their profits.'''
Write an essay of about 200 words total on one or more of the following topics:
Write an essay of about 200 words total on one or more of the following topics: