Web Activity 1

A Rand Corporation study of cocaine estimated the price elasticity of demand for this illegal drug. Find the elasticity at www.rand.org by searching "RB6002."

1. Given the price elasticity of demand estimate provided in this report, is the demand for cocaine considered to be elastic, inelastic or unit elastic?
2. Using the list of determinants of elasticity found in the text, what is the most likely explanation for the elasticity estimate in the Rand Corporation study?
3. Draw a demand curve for cocaine that demonstrates the elasticity estimate you found for part a.
4. How does the measured elasticity affect the policies recommended in the report?

Web Activity 2

Global Economic Intersection has studied recent activity in gasoline markets. You can find this analysis at http://econintersect.com/wordpress/?p=7537.

1. What does the author conclude about the relationship between price and gas sales?
2. Take two points on the "U.S. Per Capita Gasoline Sales" chart and use these points to construct a demand curve. From this demand curve, estimate price elasticity.