Question

Part 2:

For each of the following,

(a) calculate the elasticity,

(b) interpret your result (in terms of whether a good is elastic/inelastic, and what the percentage change in quantity will be in response to a 1% change in price), and

(c) indicate what would happen to revenues for this good if the price was increased

1. In response to a 10% increase in price, the quantity demanded of Bubly decreased by 20%
2. In response to a 5% decrease in price, the quantity demanded of steak increased by 60%
3. In response to a 10% increase in price, the quantity demanded did not change.

Part 2:

Figure out how much the quantity demanded changed for each of the following:

1. When the price elasticity of demand is 3, and the price increases by 10%.
2. When the price elasticity of demand is 0, and the price increases by 10%.
3. When the price elasticity of demand is 0.3, and the price increases by 10%.

Answer 1

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