Mario has chosen Virgin Media as his TV and Internet
provider. Subscribing to it allows Mario to get access to
content from Sky Sports channels and watch the English
Premier League (EPL) football matches. The subscription
price to the football premium channels is in addition to
the fee paid for the standard Virgin Media package. Mario
invites two friends who work with him to watch a football
match at his home. Is Mario a free rider because he
can watch any football game, including those games not
shown on his local television stations? Are Mario’s friends
free riders?
Q323: Suppose you own a service station, and you are currently
selling gasoline for $2.50 per gallon. At this price, you can
sell 2,000 gallons per day. You are considering cutting the
price to $2.30 to attract drivers who have been buying
their gas at competing stations. The following graph shows
two possible increases in the quantity of gasoline sold as a
result of your price cut. Use the information in the graph
to calculate the price elasticity between these two prices on
each of the demand curves. Use the midpoint formula in
your calculations. State whether each demand curve is elastic
or inelastic between these two prices.