1. In 2006, Willem de Kooning’s abstract painting Woman III sold for $137.5 million. Portray this sale in a demand and supply diagram and comment on the elasticity of supply. Comedian George Carlin once mused, “If a painting can be forged well enough to fool some experts, why is the origin also 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?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 whether demand is elastic, inelastic, or unit-elastic over this pricerange?4. Danny “Dimes” Donahue is a neighborhood’s 9-year old entrepreneur. His most recent venture is selling homemade brownies that he bakes himself. At a price of $1.50 each, he sells 100. At a price of $1.00 each, he sells 300. Is demand elastic or inelastic over this price range? If demand had the same elasticity for a price decline from $1.00 to $0.50 as it does for the decline from $1.50 to $1.00, would cutting the price from $1.00 to $0.50 increase or decrease Danny’s total revenue?