Suppose that during the past year, the price of a laptop computer rose from $2,750 to $2,880. During the same time period, consumer salesdecreased from 446,000 to 321,000 laptops.Calculate the elasticity of demand between these two price-quantity combinations by using the following steps. After each step, complete the relevantpart of the table with the appropriate answers. (Note: For decreases in price or quantity, enter values in the Change column with a minus sign.)OriginalNewAverageChangePercentage ChangeQuantity-16.3%Price$424$4242.31%Step 1: Fill in the appropriate values for original quantity, new quantity, original price, and new price.Step 2: Calculate the average quantity by adding the original quantity and the new quantity and then dividing by 2. Do the same for the averageprice.Step 3: Calculate the change in quantity by subtracting the original quantity from the new quantity. Do the same for the change in price.Step 4: Calculate the percentage change in quantity demanded by dividing the change in quantity\by the average quantity. Do the same to calculatethe percentage change in price.Step 5: Calculate the price elasticity of demand by dividing the percentage change in quantity demanded by the percentage change in price, ignoringthe negative sign.Using the midpoint method, the elasticity of demand for laptops is about 7.05

Price elasticity of demand measures the responsiveness in quantity demanded of a commodity to a…

Answered: Calculate the elasticity of demand…

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 13PAE

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The price elasticity of demand for personal computers is estimated to be 2.2. If the price of personal computers declines by 20 percent, what will be the expected percentage increase in the quantity of computers sold?
If a decrease in the price of movie tickets increases the total revenue of movie theaters, this is evidence that demand is a. price elastic. b. price inelastic. c. unit elastic with respect to price. d. perfectly inelastic.
Using the following equation for the demand for a good or service, calculate the price elasticity of demand (using the point form), cross-price elasticity with good x and income elasticity. Q=82P+0.10I+Px Q is quantity demanded, P is the product price. P1 is the price of a related good, and I is income. Assume that P= $10, I = 100, and Px = 20.
The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?
Suppose a movie theater raises the price of popcorn 10 percent, but customers do not buy any less popcorn. What does this tell you about the price elasticity of demand? What will happen to total revenue as a result of the price increase?
Explain why using the midpoint formula for calculating the elasticity of demand gives the same result whether price increases or decreases, but using the initial price and quantity instead of the average does not.
(Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of Si per unit. A reduction in price to $0.20 results in an increase in quantity demanded to 70 units. Using the midpoint formula, show that these data yield a price elasticity of 0.25. By what percentage would a 10 percent rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve?
Suppose you learned that the price elasticity of demand for wheat is 0.7 between the current price for wheat and a price 2 higher per bushel. Do you think that farmers collectively would try to reduce the supply of wheat and drive the price up 2 higher per bushel? Explain your answer. Assuming that they would try to reduce supply, what problems might they have in actually doing so?

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