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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

For each of the following, identify where demand is elastic, inelastic, perfectly elastic, perfectly inelastic, or unit elastic:

  1. a. Price rises by 10 percent, and quantity demanded falls by 2 percent.
  2. b. Price falls by 5 percent, and quantity demanded rises by 4 percent.
  3. c. Price falls by 6 percent, and quantity demanded does not change.
  4. d. Price rises by 2 percent, and quantity demanded falls by 1 percent.

To determine

Identify whether the demand is elastic, inelastic, perfectly elastic, perfectly inelastic, or unit elastic.

Explanation

Option a:

A 10% rise in price causes a 2% fall in quantity demanded. That means, the percentage change in quantity demand is less than the percent change in price. Thus, the given situation is an example of inelastic demand.

Option b:

A 5% fall in price causes a 4% rise in quantity demanded. Here also, the percentage change in quantity demand is less than the percent change in quantity demanded. Thus, the given situation is an example of inelastic demand...

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