$220,000. The quantity demanded goes down from 6,500 units to 4,200 units. a. (2 points) Calculate the price elasticity of demand for it. b. (1 point) Tell whether the demand is elastic, unit elastic or inelastic. c. (3 points) What makes housing have this price elasticity (Refer to Section 5.2)? Who will benefit and who will hurt from the rising house price (normative statement and answer)? 1
$220,000. The quantity demanded goes down from 6,500 units to 4,200 units. a. (2 points) Calculate the price elasticity of demand for it. b. (1 point) Tell whether the demand is elastic, unit elastic or inelastic. c. (3 points) What makes housing have this price elasticity (Refer to Section 5.2)? Who will benefit and who will hurt from the rising house price (normative statement and answer)? 1
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question 2 please
Transcribed Image Text:Use the midpoint method to calculate the price elasticity of demand.
1. Suppose the price of a large cup of movie theater popcorn is increased from $8 to $10
and the quantity demanded decreases from 51 to 50 cups.
a. (2 points) Calculate the price elasticity of demand for the popcorn?
b. (1 point) Tell whether the demand is elastic, unit elastic or inelastic.
c.
(3 points) With the price increasing from $8 to $10 per cup, do you foresee the
total revenue going to rise or fall for the movie theater? Prove it by finding the
total revenue before the price changes and after the price changes. Explain how
the price elasticity of it causes such a change in the total revenue.
2. Suppose that the average price of a house in a town goes up from $200,000 to
$220,000. The quantity demanded goes down from 6,500 units to 4,200 units.
a. (2 points) Calculate the price elasticity of demand for it.
b. (1 point) Tell whether the demand is elastic, unit elastic or inelastic.
c.
(3 points) What makes housing have this price elasticity (Refer to Section 5.2)?
Who will benefit and who will hurt from the rising house price (normative
statement and answer)?
1
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