Inelastic, Elastic, and Unitary Price Elasticity Implication

1. Define and explain the differences among inelastic, elastic, and unitary price elasticity.

2. What questions would you ask regarding each?

3. What recommendations would you have?

Solution Preview

1. Define and explain the differences among inelastic, elastic, and unitary price elasticity.

Elasticity of demand shows the responsiveness of the quantity demanded of a good to a variation in price. The price elasticity is termed 'elastic' when the percent change in quantity demanded is greater than the percent change in price. The price elasticity is termed 'inelastic' when the percent change in quantity demanded is less than the percent change in price. Finally, the price elasticity is termed 'unitary' when the percent change in quantity demanded is equal to the percent change in price.

2. What questions would you ask regarding each?

When there is unitary elasticity, I would ask the question: what is the change is ...

Solution Summary

This posting gives you a step-by-step explanation of Price Elasticity. The response also contains the sources used.

Suppose the demand for good x is lnQxd = 21 - .8 lnPx - 1.6 lnPy + 6.2 lnM + .4 lnAx. Then we know that the own-priceelasticity for good x is:
A. unitary.
B. elastic.
C. inelastic.
D. Indeterminable.

Suppose the price of apples rises from $3 a pound to $3.45 and your consumption of apples drops from 30 pounds of apples a month to 21 pounds of apples. Calculate your priceelasticity of demand of apples. What can you say about the priceelasticity of demand of apples? Is it Elastic,Inelastic, or Unitary Elastic? Be sure to sh

Suppose the price of apples rises from $3 a pound to $3.45 and your consumption of apples drops from 30 pounds of apples a month to 21 pounds of apples. Calculate your priceelasticity of demand of apples. What can you say about your priceelasticity of demand of apples? Is it elastic,inelastic, or unitary elastic?

Prepare an analysis by answering the questions below. Be sure to cite your references using APA format.
Demand Schedule for Barbeque Dinners
Price Quantity Demanded Total Revenue Elasticity Coefficient Elastic or Inelastic
$4 100
__________ XXXX XXXX
6 80
__________ __________ __________

Suppose the price of apples rises from $3 to $3.50 and your consumption of apples drops from 35 pounds of apples a month to 20 pounds of of apples. Calculate your priceelasticity of demand of apples. what can you say about your priceelasticity of demand of apples? Is it elastic,inelastic, or unitary Elastic? Be sure to show

With respect to the priceelasticity of demand, construct a graph using the data in figure 1. Illustrate the ranges on the demand curve that indicate elastic,inelastic,andunitaryelasticity. Explain your answers. Enter non-numerical responses in the same worksheet using tax boxes.
Quantity total

Using the midpoints formula, calculate the elasticity coefficient for each price level, starting with the coefficient for the
Price Quantity Total Elasticity Elastic or
Demanded Revenue Coefficient Inelastic
$4 100