Economics (McConnell) AP Edition, 19th Edition

Chapter 4: Elasticity

Web-based Questions

1
The price of gold—Today, yesterday, and throughout the year Visit www.goldprices.com and use the chart to find the very latest price of gold. Compare that price to the price at the beginning of the day. Next, select "1 year" at the bottom of the chart. What was the highest price during the last 12 months? The lowest price? Assume the price fluctuations observed resulted exclusively from changes in demand. Would the observed price changes have been greater or less if the gold supply had been elastic rather than inelastic? Explain.
2
Price, cross, and income elasticities—How do they relate to alcohol and cigarettes? Go to the National Bureau of Economic Research (NBER) Web site, www.nber.org, and select New Working Papers. In the Google search space, type "alcohol." Use the titles and summaries of the papers to answer the following questions relating to elasticity: (a) Do the mentally ill have perfectly inelastic demands for cigarettes and alcohol? (b) Does alcohol consumption increase in bad times? (c) What is the effect of cigarette taxes (and smuggling) on the consumption of alcohol? What does that imply about the cross elasticity of demand between the two? (d) Is binge drinking among college students sensitive to the price of alcohol?
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