You can click on the link to download the problem set for this module: Elasticity Problem Set.
Elasticity Problem Set[1]
Use the following information to answer questions 1 through 7:
When the local grocery store puts cereal on sale, reducing its price from $4.40 per item to $3.40 per item, the quantity sold increases from 220 per week to 230 per week.
- This illustrates the ________________ elasticity of _________________.
- What formula is used to determine the percentage change in quantity demanded?
- What is the percentage change in quantity demanded for the cereals described above?
- What formula is used to determine the percentage change in price?
- Calculate the percentage change in price for the cereal.
- Finally, using the whole formula, calculate the value of the price elasticity of demand for cereal.
- Explain what this result means in words.
Use the following information to answer questions 8 and 9:
Suppose that a store decreases the price of laundry detergent from $4.10 to $3.50. As a result, quantity demanded increases from 210 to 230.
- Using the mid-point approach, calculate the percentage change in price.
- Using the mid-point elasticity approach, calculate price elasticity of demand. Your answer should be expressed in absolute value terms.
Use the following information to answer questions 10 and 11:
Consider the following demand schedule for shoes.
Price | Quantity Demanded |
$5 | 385 |
$10 | 365 |
$15 | 345 |
$20 | 325 |
$25 | 305 |
$30 | 285 |
$35 | 265 |
$40 | 245 |
- Suppose that the store increases the price of shoes from $25 to $30. Using the mid-point approach, calculate price elasticity of demanded.
- Suppose that the store increases the price of shoes from $25 to $30. Based on this information, the demand curve would be classified as (select one):
- inelastic
- elastic
- unit elastic
- Suppose that when the price of laundry detergent decreases from $4.10 to $3.50, quantity supplied decreases from 260 to 180.
Using the mid-point elasticity approach, calculate price elasticity of supply.
- Consider the following supply schedule for shoes.
Price | Quantity Supplied |
$5 | 425 |
$10 | 445 |
$15 | 465 |
$20 | 485 |
$25 | 505 |
$30 | 525 |
$35 | 545 |
$40 | 565 |
Suppose that the price of shoes increases from $25 to $30. Using the mid-point approach, calculate price elasticity of supply.
- Suppose that when income increases from $2900 to $3250, quantity demanded changes from 210 to 270. Using the mid-point elasticity approach, calculate income elasticity.
- Suppose that the income increases from $2900 to $3250. As a result, quantity demanded changes from 210 to 270.
Based on this information you can tell that this product is (select one):
- a complement
- normal
- a substitute
- inferior
- Suppose that the price of one product increases from $11 to $42. As a result, quantity demanded for another product changes from 260 to 180.
Based on this information you can tell that these two products are (select one):
- complements
- normal
- substitutes
- inferior
- Suppose that when the store increases the price of laundry detergent from $2.50 to $3.90, quantity demanded decreased from 210 to 130.
What is the change in total revenue as a result of this price change? Make sure to include a negative sign in your answer if necessary.
- Suppose that you know that the price elasticity of demand is 1.3. If we increase the price of the this product, then the total revenue will (select one):
- increase
- remain unchanged
- decrease
[1] This assignment by Lumen Learning is licensed under a Creative Commons Attribution 4.0 International License. You can access an alternative means to plotting points at https://www.desmos.com/calculator.