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?

Short Answer

Expert verified

The demand for golf games is elastic.

Step by step solution

01

Introduction

The Law of Demand predicts how the quantity of a good demanded will change in relation to its price. When prices rise, demand declines, and when prices fall, demand rises, all other factors remaining constant. The idea of price elasticity of demand, on the other hand, provides information on how much demand for a good will change as a result of a change in its price.

02

Explanation

The following formula can be used to calculate price elasticity of demand.

Demand elasticity of price (Ep)role="math" localid="1651921106846" =proportionatechangeinquantitydemandedproportionateproportionatechangeinprice

Change in quantity demanded in proportion=changeinquantitydemandedaverageofthesumoforiginalandnewquantities

=ΔQQ1+Q2/2

Where,

ΔQ=Original quantity - New quantity

role="math" localid="1651921269745" Q1=the initial quantity

Q2=New Quantity

03

Explanation

Price variation in proportion=changeinpriceaverageofthesumoforiginalandnewprices

=ΔPP1+P2/2

Where,

ΔP=New Price - Original Price

role="math" localid="1651921842101" P1=Original Price

P2=New Price

Thus,

Ep=ΔQQ1+Q2/2÷ΔPP1+P2/2

When it comes to golf games:

Q1=1,200

04

:Explanation

Q2=800

ΔQ=1,200-800

=400

P1=$57.50

P2=$62.50

ΔP=$57.50-$62.50

=$5

Fill in the blanks in the equation.

Ep=ΔQQ1+Q2/2÷ΔPP1+P2/2

05

Explanation

Ep=400(1,200+800)/2÷5(57.5+62.5)/2

=4001,000÷560

=0.4÷.083

=4.8

06

Explanation

The price elasticity of demand for golf games is 4.8, which isrole="math" localid="1651924356084" >1 dollar. It suggests that a 1percent increase in the price of golf games will result in a 4.8 increase in the amount needed from customers. As a result, the need for golf games is flexible.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Would the estimated price elasticity of demand for movie tickets have been different if we had not used the average-values formula?? How?

What do you suppose were the likely short-run adjustments to the removal of the cotton subsidy by Egyptian farmers who continued to devote all of their lands to agricultural crops?

The diagram below depicts the demand curve for "miniburgers" in a nationwide fast-food market. Use the information in this diagram to answer the questions that follow.

Quantity (mini burgers per day)

a. What is the price elasticity of demand along with the range of the demand curve between a price of \(0.20per miniburger and a price of role="math" localid="1651796932841" \)0.40per miniburger? Is demand elastic or inelastic over this range?

b. What is the price elasticity of demand along with the range of the demand curve between a price of \(0.80 per miniburger and a price of \)1.20 per miniburger? Is demand elastic or inelastic over this range?

c. What is the price elasticity of demand along with the range of the demand curve between a price of \(1.60 per miniburger and a price of \)1.80 per m ? Is demand elastic or inelastic over this range?

An individual's income rises from \(80,000per year to \)84,000per year, and as a consequence the person's purchases of movie downloads rise from 48per year to 72per year. What is this individual's income elasticity of demand? Are movie downloads a normal or inferior good? (Hint: You may want to refer to the discussion of normal and inferior goods in Chapter 3.)

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?

See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free