Q1. Explain why the following situations would occur in terms of the factors that affect elasticity.
(a) Demand for cellular service is inelastic in the short run, but more elastic in the long run.
(b) Demand for a bakery's bread is elastic, while demand for bread is inelastic.
(c) Demand for personal computers is elastic.
What is the main determinant of the price elasticity of supply? Explain.
Q2. Explain the difference between economic and accounting profits. Explain how could you graphically illustrate economic profits made by a perfectly competitive firm; monopolist; and firm competing in a monopolistic competitive market? What conditions exist when economic profits are maximized?