1. Determine the price elasticity of demand if, in response to an increase in price of 10 percent, the quantity demanded decreases by 20 percent.

2. When tolls on the Dulles Airport Greenway were reduced from $1.75 to $1.00, traffic increased from 10,000 to 26,000 trips a day. Assuming all changes in quantity were due to the change in price, what is the price elasticity of demand for the Dulles Airport Greenway?

3. One football season, Domino's Pizza, a corporate sponsor of the Washington Redskins (a football team), offered to reduce the price of its $8 medium-size pizza by $1 for every touchdown scored by the Redskins during the previous week. Until that year, the Redskins weren't scoring many touchdowns. Much to the surprise of Domino's, in one week in 1999, the Redskins scored 4 touchdowns. (Maybe they like pizza.) Domino's pizzas were selling for $4 a pie. The quantity of pizzas demanded soared the following week from 30 pies an hour to 70 pies an hour. What was the price elasticity of demand for Domino's pizza?

4. University of Richmond Professor Erik Craft analyzed the states' pricing of vanity plates. He found that in California, where vanity plates cost $28.75, the elasticity of demand was 0.52. In Massachusetts, where vanity plates cost $50, the elasticity of demand was 3.52.

a. Assuming vanity plates have zero production cost and his estimates are correct, was each state collecting the maximum revenue it could from vanity plates? Explain your reasoning.

b. What would you recommend to each state so that each maximizes tax revenue?

c. Which state's policy is least popular politically?

5. When the price of ketchup rises by 15 percent, the demand for hot dogs falls by 1 percent.

a. What is the cross-price elasticity of demand?

b. Are they complements or substitutes?