Definition of Elasticity of Demand: It is a measure of how responsive quantity is to a price change. The hlether the measure then the more responsive consumers will be to a change in price. The lower the measure then the less responsive consumers will be to a change in price. 1. The elasticity of demand is higher in the long run because consumers have MORE time to adjust. 2. An Elasticity of 1.0 of greater = elastic demand (page 110 in book) 3. An Elasticity of exactly 1.0 = unit clastic demand 4. An Elasticity of between 0 and 1.0 = inelastic demand 5. Use the Elasticity formula to calculate values of Elasticity for all the situations below. Change negatives to positives. STEP 1: The formula used to calculate the percentage change in quantity demanded is: | (QDemand(NEW) - QDemand(OLD)/ / QDemand(OLD) | STEP 2: The formula used to calculate the percentage change in price is: | [Price(NEW) - Price(OLD)] / Price(OLD) | STEP 3: (STEP 1)/(STEP 2) multicolumn(2)(|c|)( Price ) & multirow(2)(*){ Quantity Initial { STEP 1 % change in quantity demanded { STEP 2 % change in price { STEP 3 Price Elasticity of Demand Initial & New & Initial & New & & & 25 & 30 & 100 & 40 & & & 1. 40 & 70 & 120 & 90 & & & 2. 200 & 220 & 80 & 64 & & & 3. 50 & 75 & 150 & 135 & & & 4. each case identify whether you would describe it as elastic / unit elastic / inelastic 1. 2. 3. 4.

Question

Definition of Elasticity of Demand: It is a measure of how responsive quantity is to a price change. The hlether the measure then the more responsive consumers will be to a change in price. The lower the measure then the less responsive consumers will be to a change in price. 1. The elasticity of demand is higher in the long run because consumers have MORE time to adjust. 2. An Elasticity of 1.0 of greater = elastic demand (page 110 in book) 3. An Elasticity of exactly 1.0 = unit clastic demand 4. An Elasticity of between 0 and 1.0 = inelastic demand 5. Use the Elasticity formula to calculate values of Elasticity for all the situations below. Change negatives to positives. STEP 1: The formula used to calculate the percentage change in quantity demanded is: | (QDemand(NEW) - QDemand(OLD)/ / QDemand(OLD) | STEP 2: The formula used to calculate the percentage change in price is: | [Price(NEW) - Price(OLD)] / Price(OLD) | STEP 3: (STEP 1)/(STEP 2) multicolumn(2)(|c|)( Price ) & multirow(2)(*){ Quantity Initial { STEP 1 % change in quantity demanded { STEP 2 % change in price { STEP 3 Price Elasticity of Demand Initial & New & Initial & New & & & 25 & 30 & 100 & 40 & & & 1. 40 & 70 & 120 & 90 & & & 2. 200 & 220 & 80 & 64 & & & 3. 50 & 75 & 150 & 135 & & & 4. each case identify whether you would describe it as elastic / unit elastic / inelastic 1. 2. 3. 4.

Answer 1

The measure being described is the **elasticity of demand**. Elasticity of demand measures how responsive the quantity demanded of a good is to a change in its price.1. The elasticity of demand is higher in the long run because consumers have more time to adjust their behavior and find alternatives.2. An elasticity of 1.0 or greater indicates elastic demand, meaning consumers are highly responsive to price changes.3. An elasticity of exactly 1.0 indicates unit elastic demand, meaning the percentage change in quantity demanded is equal to the percentage change in price.4. An elasticity of between 0 and 1.0 indicates inelastic demand, meaning consumers are less responsive to price changes.To calculate elasticity:STEP 1: Calculate the percentage change in quantity demanded:

STEP 2: Calculate the percentage change in price:

STEP 3: Divide the result from STEP 1 by the result from STEP 2 to get the elasticity value.For each case, you would then identify whether the demand is elastic, unit elastic, or inelastic based on the calculated elasticity value.

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