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Adam and Barb go to the store to purchase some lottery tickets. Without looking at the...

Adam and Barb go to the store to purchase some lottery tickets. Without looking at the price, Adam says “I’ll take 10 lottery tickets,” and Barb says, “I’ll take $10 worth of lottery tickets.” What is each person’s price elasticity of demand for lottery tickets?

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Answer #1

Adam will buy 10 lottery tickets, no matter whatever is the price. So it means that the change in price of lottery tickets is not affecting its quantity demanded. So it is the case of perfectly inelastic demand.

Barb will spend $10, no matter how many tickets he would be able to buy. As in this case total expenditure($10) is same so demand will be unitary elastic. In the case of unitary elastic demand, percentage change in price is equal to the percent change in demand so in this case total expenditure remains same.

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