From the data in Table 5.5 about demand for smart phones, calculate the
Calculate the elasticity of demand at various points on the demand curve and classify them as inelastic, unit elastic and elastic.
Answer to Problem 1SCQ
Price elasticity of demand from point B to C is 0.5
The price elasticity of demand at point D to E is 0.75
The price elasticity of demand at point G to H is 1.32.
Explanation of Solution
Let’s calculate the price elasticity of demand from point B to C:
Therefore, the price elasticity of demand from point B to C is 0.5. Since the elasticity of demand is less than 1, the demand is inelastic, which means there is less change in quantity demanded as compared to the change in price level.
Now, we find out the price elasticity of demand at point D to E:
Therefore, the price elasticity of demand from point D to E is 0.75. Since the elasticity of demand is less than 1, the demand is inelastic, which means there is less change in quantity demanded as compared to the change in price level.
Now, we find out the price elasticity of demand at point G to H:
Therefore, the price elasticity of demand from point G to H is 1.32, since the elasticity of demand is greater than 1; the demand is elastic, which means there is large change in quantity demanded as compared to the change in price level.
Price elasticity of demand: The degree of responsiveness to change in quantity demanded due to change in its price. The formula for calculating elasticity of demand is as follows:
Want to see more full solutions like this?
Chapter 5 Solutions
Principles of Macroeconomics 2e
Additional Business Textbook Solutions
Principles of Accounting Volume 2
Managerial Accounting (5th Edition)
Horngren's Accounting (12th Edition)
Managerial Accounting (4th Edition)
Principles of Management
Financial Accounting (12th Edition) (What's New in Accounting)
- What are the major determinants of a products price elasticity of demand? Studies indicate that the demand for Florida oranges, Bayer aspirin, watermelons, and airfares to Europe are elastic. Why?arrow_forwardUsing the following equation for the demand for a good or service, calculate the price elasticity of demand (using the point form), cross-price elasticity with good x and income elasticity. Q=82P+0.10I+Px Q is quantity demanded, P is the product price. P1 is the price of a related good, and I is income. Assume that P= $10, I = 100, and Px = 20.arrow_forwardSuppose a movie theater raises the price of popcorn 10 percent, but customers do not buy any less popcorn. What does this tell you about the price elasticity of demand? What will happen to total revenue as a result of the price increase?arrow_forward
- Prove that price elasticity of demand is not the same as the slope of a demand curve.arrow_forwardJills Sausage Dog Stand projects the following demand for Jills sausage dogs: a. Calculate the price elasticity of demand between 2 and 4. Is demand in this range elastic or inelastic? b. Calculate the price elasticity of demand between 4 and 6. Is demand in this range elastic or inelastic?arrow_forwardWhat does a price elasticity of demand of 0.39 mean?arrow_forward
- Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningEconomics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning