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.