1. Bellringer on slates
• The city of Tucson is considering lowering the price
of prescription drugs to help poor people. Correctly
draw a graph showing this policy and its effects.
2. Assume that in the market for
pharmaceutical drugs, the demand
is relatively inelastic while the
supply is relatively elastic. Congress
is considering a per unit tax on
every pill sold in the US.
1. Draw this market and explain
who has a larger tax burden
2. If a firm raises its price in this
market, explain what happens to
revenue?
6. Say the Tohono O'odham tribe wants to pay for and build a soccer
stadium next to the casino on Los Reales.
1. List all negative and positive externalities that would be created.
2. Which set of externalities seem to be greater and why?
3. Why should the city of Tucson help finance the stadium?
4. Solve the problem of the negative externalities, how could the
tribe still get the stadium while minimizing harm to neighbors and
governments?
7. 8. If the tribe eventually builds the stadium and their
research team notices that for every 10% decrease in
tickets, they sell an addition 10% season tickets, what
does this tell us about the elasticity of demand for
tickets?
9. Sodas in the stadium however decrease in sales by
20% for every 5 % increase in price. What does that
say about its elasticity?
10. Jersey sales increase by 5% for every 10% drop in
price, what does that say about its elasticity?
11. What products would the team measure price
changes using cross-price elasticity?
12. Which elasticity would you use if the unemployment
rate became lower?
13. Is this a good idea? Explain using economic reasoning