Chapter 5

Exercise 1: Visit a few of the major anti-tobacco groups: the American Lung Association (www.lungusa.org), the Tobacco Control Resource Center (www.tobacco.neu.edu), and Smoke-Free Kids (www.cdc.gov/tobacco/sports_initiatives_splash.htm). What are these groups doing to increase the elasticity of demand for cigarettes?

Exercise 2: Does the federal government take economic concepts (such as elasticity) into consideration when it formulates energy and environmental policies? Visit the Department of Energy, Energy Information Administration and review its materials on the economy and environment. (www.eia.doe.gov)

Exercise 3: Movie stars are not the only personalities that advertise products. Some rock stars offer all kinds of products for sale. Visit Coldplay’s website to see what is for sale. (http://coldplayshop.com/) What is the price elasticity of demand for the products to their customers?

Exercise 4: The Kelley Blue Book Official Guide is a major source of new and used car prices (www.kbb.com). Find the new car prices for two popular cars: Honda Accord and the Ford Fusion. Are the two cars closely priced? Do you think physically similar goods are close substitutes when they are more closely priced than when they are less closely priced? Or do you think the issue of closeness in price is irrelevant to the degree of substitution? Explain your answer. Do you think the cross-price elasticity of demand between the Accord and Fusion is positive or negative? Explain your answer.