ECON 507 Week 3 – Assignment 1

use 3 US sources only.

1. Discuss the relative price elasticity of the following products:
Mayonnaise
A specific brand of mayonnaise
Chevrolet automobiles
Jaguar automobiles
A company faced by an elastic demand curve will always benefit by decreasing price. True or false? Explain.
In 2002 the U.S. Postal Service increased first-class postage rates from 34? to 37?. The service had been losing money. One of the reasons is increased competition from companies such as United Parcel Service and Federal Express. Another reason is the use of faxes and e-mail, as well as electronic bill payment. With this decrease in demand for postal services, why do you think that the Postal Service is seeking a rate increase?