4. "Economists use price elasticity of demand to measure demand sensitivity as a result of price changes for a given product. This measurement can be useful in forecasting consumer behavior and economic events, such as a recession.In business and economics, price elasticity refers to the degree to which individuals, consumers, or producers change their demand or the amount supplied in response to price or income changes. It is predominantly used to assess the change in consumer demand as a result of a change in a good or service's price". In an economy of imaginary Island the price of a commodity falls from $225 to $ 186, the quantity demanded increases from 300 to 480. a. Calculate the Elasticity of demand and find the type of elasticity? (5 marks) b. Explain the factors affecting the demand for a product? (any 3)

4. "Economists use price elasticity of demand to measure demand sensitivity as a result of price changes for a given product. This measurement can be useful in forecasting consumer behavior and economic events, such as a recession.In business and economics, price elasticity refers to the degree to which individuals, consumers, or producers change their demand or the amount supplied in response to price or income changes. It is predominantly used to assess the change in consumer demand as a result of a change in a good or service's price". In an economy of imaginary Island the price of a commodity falls from $225 to $ 186, the quantity demanded increases from 300 to 480. a. Calculate the Elasticity of demand and find the type of elasticity? (5 marks) b. Explain the factors affecting the demand for a product? (any 3)

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 6PA: Suppose that your demand schedule for DVDs is as follows: Price Quantity Demanded (income = 10,000)...

See similar textbooks

Similar questions

What is the relationship between price elasticity and position on the demand curve? For example, as you move up the demand curve to higher prices and lower quantities, what happens lo the measured elasticity? How would you explain that?
Review Figure 3.4 again. Suppose the price of gasoline is 1.00. Will the quantity demanded he lower or higher than at the equilibrium price of 1.40 per gallon? Will the quantity supplied be lower or higher? Is them a shortage or a surplus in the market? If so, of how much? Figure 3.4 Demand and Supply of Gasoline
What is the price elasticity of demand? Can you explain it in your own words?
Suppose the cross-price elasticity of apples with respect to the price of oranges is 0.4, and the price of oranges falls by 3. What will happen to the demand for apples?
If a 10 decrease in the price of one product that you buy causes an 8 increase in quantity demanded of that product, will another 10 decrease in the price cause another 3 increase (no more and no less) in quantity demanded?
What is the price elasticity of supply? Can you explain it in your own words?
Suppose that your demand schedule for DVDs is as follows: Price Quantity Demanded (income = 10,000) Quantity Demanded (income = 12,000) 8 40 DVDs 50 DVDs 10 32 45 12 24 30 14 16 20 16 8 12 a. Use the midpoint method to calculate your price elasticity of demand as the price of DVDs increases from 8 to 10 if (i) your income is 10,000 and (ii) your income is 12,000. b. Calculate your income elasticity of demand as your income increases from 10,000 to 12,000 if (i) the price is 12 and (ii) the price is 16.
A price change causes the quantity demanded of a good to decrease by 30 percent, while the total revenue of that good increases by 15 percent. Is the demand curve elastic or inelastic? Explain.
If supply is elastic, will shifts in demand have a larger effect on equilibrium quantity or on price?