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Chapter 19: 19.1 Learning objective (page 416)

Calculate price elasticity of demand

Short Answer

Expert verified

The price elasticity of demand concept is explained

Step by step solution

01

Introduction 

The ratio of the percentage change in quantity demanded of a product to the percentage change in price is known as price elasticity of demand. Economists use it to figure out how supply and demand change when the price of a product changes.

02

Calculating price elasticity of demand

Elasticity is calculated using the following formula:

Price Elasticity of Demand=percent change in quantitypercent change in price.
03

Example for calculating price elasticity of demand

Teenagers, minorities, low-income smokers, and casual smokers are particularly sensitive to price changes: for every ten percent increase in the price of a pack of cigarettes, smoking rates decline by roughly seven percent. We obtain by plugging those numbers into the formula

Price Elasticity of Demand=percent change in quantitypercent change in price=-7%10%=-0.7

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Most popular questions from this chapter

At a price of \(57.50to play 18holes on local golf courses, 1,200consumers pay to play a game of golf each day. A rise in the price to \)62.50causes the number of consumers to decline to 800. What is the price elasticity of demand? Is demand elastic, unit-elastic, or inelastic?

At a price of \(25,000, producers of midsized automobiles are willing to manufacture and sell 75,000cars per month. At a price of \)35,000, they are willing to produce and sell 125,000a month. Using the same type of calculation method used to compute the price elasticity of demand, what is the price elasticity of supply? Is supply elastic, unit-elastic, or inelastic?

Explain the cross-price elasticity of demand and income elasticity of demand

Suppose that the cross price elasticity of demand between eggs and bacon is -0.5. What would you expect to happen to purchases of bacon if the price of eggs rises by 10 percent?

Why does it make sense that Fryer found a positive percentage change in the number of learning tasks supplied in response to a rise in the monetary reward for performing them?
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