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Introduction to Elasticity
 
 
Key Terms for Elasticity
 
 
Elasticity
 
 
Practice Problems for Elasticity
 
 
Elasticity in the Real World
 
 
Review Problems
 
 
 
 
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Elasticity

 
 

Practice Problems for Elasticity

 
Problem 1.1: Yesterday, the price of envelopes was $3 a box, and Julie was willing to buy 10 boxes. Today, the price has gone up to $3.75 a box, and Julie is now willing to buy 8 boxes. Is Julie's demand for envelopes elastic or inelastic? What is Julie's elasticity of demand? [Solution]
Problem 1.2: If Neil's elasticity of demand for hot dogs is constantly 0.9, and he buys 4 hot dogs when the price is $1.50 per hot dog, how many will he buy when the price is $1.00 per hot dog? [Solution]
Problem 1.3: Which of the following goods are likely to have elastic demand, and which are likely to have inelastic demand?

Home heating oil
Pepsi
Chocolate
Water
Heart medication
Oriental rugs [Solution]
Problem 1.4: If supply is unit elastic and demand is inelastic, a shift in which curve would affect quantity more? Price more? [Solution]
Problem 1.5: Katherine advertises to sell cookies for $4 a dozen. She sells 50 dozen, and decides that she can charge more. She raises the price to $6 a dozen and sells 40 dozen. What is the elasticity of demand? Assuming that the elasticity of demand is constant, how many would she sell if the price were $10 a box? [Solution]
 
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