1)If the price elasticity of supply for zinc is 0.39, then price elasticity of supply for zinc is?

2)1. The price elasticity of demand is -1.2. Is demand elastic or inelastic?

2. You are a manager in a regional health system. Using an estimate of the price elasticity of demand of -0.25, calculate how much ambulatory visits will change if you raise prices by 5 percent.

3. A study estimates that the price elasticity of demand for drug E is -3.41, but the price elasticity of demand for its class of drugs as a whole is -0.22.

a. Why is demand for drug E more elastic than for the whole class of drugs?

b. What would happen to revenues if the makers of drug E raised prices by 10 percent?

c. What would happen to industry revenues if all manufacturers raised prices by 10 percent?

d. Why are the answers so different? Does this difference make sense?

1)please see the attached file for the complete solution.

2)1) If elasticity of demand is -1.2, the demand is elastic.

2) If the elasticity of demand is -0.25 and the prices increase by 5%, the quantity demanded will decrease by 0.25 * 5 = 1.25%

3) a. The elasticity of demand of drug E is more elastic than the whole class of drugs because drug E might have a number of close substitutes. If the price of drug E increases, people might shop for a cheaper alternative. In general, if you define the market more narrowly, the demand for every goods become more elastic.

b. Revenue will decrease. This is because a 10% increase in price causes the demand to decrease by 34.10%.

c. Revenue will increase. This is because a 10% increase in price causes the demand to decrease by only 2.20%

d. The answers are different because of the difference in the elasticity of demand. There aren't close substitute to "drugs", therefore your revenue increases even when you increase the price. But, if you just look at ONE drug among thousands of other drugs, if you raise the price, people will opt for a cheater option- hence, your revenue will decrease.