# Calculating price and elasticity of demand

Suppose that your demand schedule for cell phone applications is as follows:

Quantity Demanded per Year Quantity Demanded per Year

Price per Application (income = $40,000 per year) (income = $50,000 per year)

$ 2 60 70

4 52 59

6 44 50

8 32 42

10 24 30

? Calculate the price elasticity of demand as the price of a cell phone application decreases from $6 to $4 if your income is: (i) $40,000 per year, and (ii) $50,000 per year. Is the price elasticity of demand elastic, inelastic or unitary elastic? Briefly explain

? Calculate the income elasticity of demand as your income increases from $40,000 to $50,000 if: (i) the price per cell phone application is $6, and (ii) the price is $8. Is the income elasticity of demand high, low or unitary? Briefly explain.

© BrainMass Inc. brainmass.com July 21, 2018, 11:40 am ad1c9bdddf#### Solution Preview

Please refer attached file for complete solution. Expressions typed with the help of equation writer are missing here.

? Calculate the price elasticity of demand as the price of a cell phone application decreases from $6 to $4 if your income is:

(i) $40,000 per year, and

Price elasticity of demand=

(ii) $50,000 per year.

Price elasticity of demand=

Absolute value of price ...

#### Solution Summary

The solution describes the steps to calculate price and elasticity of demand.