Consumer Behaviour

1. In 2006, Willem de Kooning’s abstract painting Woman IIIsold for $137.5 million. Portray this sale in a demand andsupply diagram and comment on the elasticity of supply.Comedian George Carlin once mused, “If a painting can beforged well enough to fool some experts, why is the originalso valuable?” Provide an answer

.2. Suppose the cross elasticity of demand for products A and Bis 13.6 and for products C and D is 25.4. What can you conclude about how products A and B are related? Products C and D?

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3. Suppose that the total revenue received by a company sell-ing basketballs is $600 when the price is set at $30 per bas-ketball and $600 when the price is set at $20 per basketball.
Without using the midpoint formula, can you tell whetherdemand is elastic, inelastic, or unit-elastic over this pricerange?

4. Danny “Dimes” Donahue is a neighborhood’s 9-year oldentrepreneur. His most recent venture is selling homemadebrownies that he bakes himself. At a price of $1.50 each, hesells 100. At a price of $1.00 each, he sells 300. Is demandelastic or inelastic over this price range? If demand had thesame elasticity for a price decline from $1.00 to $0.50 as itdoes for the decline from $1.50 to $1.00, would cutting theprice from $1.00 to $0.50 increase or decrease Danny’s totalrevenue

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