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Chapter 6: Problem 2

The price of organic apples falls, and apple growers find that their revenue increases. Is the demand for organic apples elastic or inelastic?

Short Answer

Expert verified
The demand for organic apples is elastic.

Step by step solution

01

Understand Elastic and Inelastic Demand

The elasticity of demand measures the percentage change in the quantity demanded of a good due to a one percent change in price. If the percentage change in quantity demanded exceeds the percentage change in price, then the demand for that good is considered elastic. On the contrary, if the percentage change in quantity demanded is less than the percentage change in price, then the demand for that good is considered inelastic.
02

Identify Price and Revenue Relation

In this scenario, the price of organic apples falls and the revenue increases. This implies that the quantity of apples sold increases by a greater percentage than the decrease in price.
03

Determine the Elasticity of Demand

Given that the percentage increase in quantity demanded is greater than the percentage decrease in price, it can be concluded that the demand for organic apples is elastic.

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Most popular questions from this chapter

Draw a graph of a perfectly inelastic demand curve. Think of a product that would have a perfectly inelastic demand curve. Explain why demand for this product would be perfectly inelastic.

What is the midpoint formula for calculating price elasticity of demand? How else can you calculate the price elasticity of demand? What is the advantage of using the midpoint formula?

What is the main determinant of the price elasticity of supply?

To legally operate a taxi in New York City, a driver must have a medallion issued by the New York City Taxi and Limousine Commission, an agency of the city's government. In 2017 the number of medallions was 13,587 . In recent years the taxi industry in New York and other large cities has encountered competition from companies such as Uber, an app-based service that offers rides from drivers who own their own cars. Uber varies the prices it charges based on the demand for rides, with rides during busier periods, such as Saturday nights, having higher prices. a. What does the limitation on their number imply about the price elasticity of supply of taxi medallions? b. Is the supply of Uber rides more or less elastic than the supply of taxi rides in New York City? Briefly explain.

A study of the consumption of beverages in Mexico found that "overall, for soft drinks a \(10 \%\) price increase decreases the quantity consumed by \(10.6 \%\)." Given this information, calculate the price elasticity of demand for soda in Mexico. Is demand price elastic or price inelastic? Briefly explain. Source: M. A. Colchero, et al. "Price Elasticity of the Demand for Sugar Sweetened Beverages and Soft Drinks in Mexico," Economics and Human Biology," Vol. 19, December 2015, pp. \(129-137\).
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