The city thus gathers information about elasticity of demand. If the city wishes to raise as much revenue

as possible from the tolls, where will the city decide to charge a toll: in the inelastic portion of the demand

curve, the elastic portion of the demand curve, or the unit elastic portion? Explain.

30. In a market where the supply curve is perfectly inelastic, how does an excise tax affect the price paid by

consumers and the quantity bought and sold?

31. Economists define normal goods as having a positive income elasticity. We can divide normal goods into

two types: Those whose income elasticity is less than one and those whose income elasticity is greater

than one. Think about products that would fall into each category. Can you come up with a name for each

category?

32. Suppose you could buy shoes one at a time, rather than in pairs. What do you predict the cross-price

elasticity for left shoes and right shoes would be?

Problems
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