Suppose the price of apples rises from $3.50 a pound to $4.00 and your consumption of apples drops from 30 pounds of apples a month to 20 pounds of apples. Calculate your price elasticity of demand of apples. What can you say about your price elasticity of demand of apples? Is it Elastic, Inelastic, or Unitary Elastic? Be sure to show the work you used to support your answer.

Calculate the elasticity of demand and explain the meaning of the calculation. State the factors that determine the factors that generate the elasticity of demand. Note that the elasticity is a ratio of two percent changes: one for price and one for quantity demanded. As you examine your answer, note that elasticity of demand is the ratio of TWO SEPARATE percent changes. You may use the midpoint method on or you can use the simple percent change method.

Solution Preview

Suppose the price of apples rises from $3 a pound to $3.50 and your consumption of apples drops from 35 pounds of apples a month to 20 pounds of apples. Calculate your price elasticity of demand of apples. What can you say about your price elasticity of demand of apples? Is it Elastic, Inelastic, or Unitary Elastic?

Elasticity is the proportional change in one variable relative to the proportion ...

Solution Summary

This posting calculates the elasticity of demand and explain the meaning of the calculation.

... Therefore, 1% change in price at this level results in less than 1% decrease in the quantity demanded and hence the price elasticity of demand is inelastic. ...

... Change in Average Elasticity Price Demanded Revenue Quantity ... the total revenue for each level of demand. ... in the text, calculate the elasticity coefficient for ...

... change in quantity demanded. The demand for most products is such that consumers do care about changes in prices and the concept of elasticity tells us just ...

... price elasticity Q1 = original quantity demanded Q2 = new quantity demanded P1 = Original ... value of elasticity is 1, arc price elasticity of demand is unit ...

... (thetimes100, 2009) We can show this in a simple formula: Price elasticity demand = percentage change in quantity demanded divided by percentage change in the ...

...elasticity is less than 1, income elasticity is inelastic. Q4 "The demand for new recreational vehicles (motor ... of the following on the quantity demanded or the ...