 The market for milk is in equilibrium.

Recent health reports indicate that calcium is

absorbed better in natural forms such as milk, and at the same time, the cost of
milking equipment rises. Carefully analyze the probable effects on the market.
 Suppose that macroeconomic forecasters predict that the economy will be
expanding in the near future. How might managers use this information?
 Governments impose excise taxes on goods that have inelastic demand, such as
cigarettes, more often than in other cases. Why?
 The initial price of a cup of coffee is $1, and at that price, 400 cups are demanded.
If the price
falls to $0.90, the quantity demanded will increase to 500.
a. Calculate the (arc) price elasticity of demand for coffee.
b. Based on your answer, is the demand for coffee elastic or inelastic?
c. Based on your answer to a., if the price of coffee is increased by 10%, what will
happen to the revenues from coffee? Carefully explain how you know.