Problem : 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?To find Julie's elasticity of demand, we need to divide the percent change in quantity by the percent change in price.
Problem : 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?This time, we are using elasticity to find quantity, instead of the other way around. We will use the same formula, plug in what we know, and solve from there.
Which of the following goods are likely to have elastic demand, and which are
likely to have inelastic demand?
Home heating oil
Problem : If supply is unit elastic and demand is inelastic, a shift in which curve would affect quantity more? Price more?Shifting the demand curve would affect quantity more, and shifting the supply curve would affect price more.
Problem : 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?To find the elasticity of demand, we need to divide the percent change in quantity by the percent change in price.