Question

2. For the following questions calculate the relevant elasticity and classify it as elastic, inelastic, or unit elastic. (Be sure to have the correct sign with your answers)

a. The price of roses goes from $0.75 to $1.25 per stem causing the quantity demanded to fall from 205 to 195 stems per week.

b. An increase in the price of pizza from $1.90 to $2.10 per slice causes an increase in supply from 57 to 63 slices per day.

c. Jim’s income rises from $45,000 per year to $55,000 per year and his demand for a good falls from 25 to 15 units per year. In addition to the above questions, is this a normal or inferior good?

d. If the price of good Y rises from $9 to $11 causing the quantity demanded of good X to fall from 600 to 400 units. In addition to the above questions, are these goods complements or substitutes?

Answer 1