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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

For Adam, he will buy 10 lottery tickets irrespective of the price. So, the purchase decision is independent of price, thus Adam has a perfectly inelastic demand curve for lottery ticket.

On the other hand, for Barb, he will buy $10 worth of lottry ticket, Here, he will buy $10 worth of ticket irrespective of the price of it. So, if the price is p, he will purchase 10/p tickets. Thus his price elasticity is (dq/q)/(dp/p) = (p/q)*(dq/dp)

=(p^2/10)*(-10/p^2) = 1

Thus, the elasticity of Barb is unit elastic.

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