Chapter 5, Problem 1P

To determine

The missing amount.

Explanation of Solution

The given information:

Demand for Ben and Jerry’s ice cream.

% changes in price = 10%

% changes in quantity = -12%

Demand for beer at San Francisco

% changes in price = -20%

Elasticity = -5

Demand for Broadway theatre tickets in New York  

% changes in quantity = -15%

Elasticity = -10

Supply of chicken

% changes in price = 10%

Elasticity = 1.2

Supply of beef cattle

% changes in price = -15%

% changes in quantity = -10%

Calculation:

The general formula to calculate the elasticity is shown below:

$\text{Elasticity}\text{of}\text{demand}=\frac{\text{\%}\text{changes}\text{in}\text{quantity}\text{demanded}}{\text{\%}\text{changes}\text{in}\text{price}}$ (1)

Substitute the respective values in Equation (1) to calculate the elasticity of demand.

$\begin{array}{c}\text{Ed}=\frac{-12}{10}\\ =-1.2\end{array}$

Elasticity of demand for Ben and Jerry’s ice cream is -1.2%.

Using Equation (1), % changes in quantity, % change sin price and elasticity is shown below in Table 1:

Table 1

	% changes in price	% changes in quantity	Elasticity
Demand for Ben and Jerry’s ice cream.	+10%	-12%	(a) 1.2
Demand for beer at San Francisco	-20%	(b) +10	-0.5
Demand for Broadway theatre tickets in New York	(c) +15%	-15%	-1.0
Supply of chicken	-10%	(d) +12%	+1.2
Supply of beef cattle	-15%	-10%	(e) -0.67

Economics Concept Introduction

Elasticity: Elasticity refers to the responsiveness or the change in the quantity demanded due to the change in price.