Computation of the elasticity of demand
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Sir/ma'am,
I am having a hard time understanding how to solve the following two quantitative problems. I am supposed to be able to solve for this problem given any set of values. Please feel free to make those up. I am just hoping to understand how to solve this problem if and when it comes up.
See attachment.
Thanks in advance.
1. Own Price elasticity or cross-price elasticity. Given a table of the price(s) and quantities before the price rises, how do you compute the POINT (or ARC) elasticity of demand of a good as its price rises.
PLEASE SHOW FORMULA AND WORK
Solve this problem for each one of these forms:
-Own-Price elasticity by point method
-Own-Price elasticity by arc method
-Cross-Price elasticity by point method
-Cross-Price elasticity by arc method
For own-price elasticity, state whether the demand for this good is elastic or inelastic.
For cross-price elasticity, state whether the goods are substitutes or complements.
2. A table like the one below is given, plus a wage and a cost of capital. The problem is to fill in the BLANKS. Put formulas in the cells above the variable names. Do not enter formulas in cells with "///" in them.
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Solution Summary
Given a table of prices and quantities, the point and arc elasticities of demand are calculated.
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