# Economics in a Global Environment

Details: 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.

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#### Solution Preview

Percentage change in quantity demanded: (30-20)/30= 10/30= .33 or 33.33%

Percentage change in price= (4-3.5)/3.5= .5/3.5= 14.28%

Price Elasticity= 33.33/14.28= 2.33

Thus, the price elasticity of demand of apples is elastic or in other words, a small change in price leads to a change in the demand of apples. It is not unitary elastic because the percentage change in price is not equal to percentage change in ...

#### Solution Summary

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.