Question

1. Consider the market for ice-cream. Compare the price elasticity demand for ice cream in (i)...

1. Consider the market for ice-cream. Compare the price elasticity demand for ice cream in

(i) Winter vs (ii) Summer.

Show your answers in two graphs.

2. For the market for oranges, when price rises from $4 to $5, quantity demanded drops from 8 to 7.

(a) Calculate the price elasticity of demand.

(b) Is the demand for oranges elastic?

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Homework Answers

Answer #1

1. If we talk about the market of ice cream then as we all know that demand will be high in summer as compared to winter

in summer the price elasticity of demand will be elastic in nature

An Elastic demand is that type of demand in which even there is a small change in the price can causes heavy change in the quantity demanded

in this the consumers are price sensitive

if there is small increase in the price then consumer shift to other substitute

If we talk about in winter then price elasticity of demand is inelastic in nature

An inelastic demand is that type of demand in which even there is very high change in the price will cause a very low change in the quantity demanded

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