1.Yesterday, the price of envelopes was P300 a box, and Julie was willing to buy 10 boxes. Today, the price has gone up to P375 a box, and Julie is now willing to buy 8 boxes. Is Julie's demand for envelopes elastic or inelastic? What is Julie's elasticity of demand?2. Genovia has experienced exceptional growth in recent years. Its GDP per capita has increased from around $30,000 to $50,000 in last 5 years. Over the period quantity demanded of personal cars has increased from 450,000 units per year to 600,000 units. Quantity demanded of public transport, however, has declined from 10,000 buses to 7,000 buses. Calculate income elasticity of demand and tell which product is a normal good and which one is inferior. ELASTICITY OF DEMANDPrice ElasticityPrice elasticity of demandPercentage change in quantity demandedЕрPercentage change in priceQ2 - Q1% Change in quantityx 100(Q2 + Q1)/2P2 - P.% Change in price =x 100(P2 + P1)/2Where:Q2 = Current quantityQ1= Previous quantityP2 = Current priceP,= Previous priceValues of ElasticityPrice elasticity coefficientDemand elasticityLess than 1InelasticPerfectly inelastic1UnitaryMore than 1Elastic Income ElasticityIncome Elasticity of DemandPercentage change in quantity demandedEp =Percentage change in incomeQ2 - Q1(Q2 + Q1)/212 - 14(I2 + 1,)/2% Change in quantity =x 10% Change in income =x 100Where:Q2 = Current quantityQ1= Previous quantity12 = Current income1 = Previous income

Price Elasticity of Demand measures the percenatge change in quantity demanded due to percentage…

Answered: Yesterday, the price of envelopes was…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1.Yesterday, the price of envelopes was P300 a box, and Julie was willing to buy 10 boxes. Today,
the price has gone up to P375 a box, and Julie is now willing to buy 8 boxes. Is Julie's demand for
envelopes elastic or inelastic? What is Julie's elasticity of demand?
2. Genovia has experienced exceptional growth in recent years. Its GDP per capita has increased
from around $30,000 to $50,000 in last 5 years. Over the period quantity demanded of personal
cars has increased from 450,000 units per year to 600,000 units. Quantity demanded of public
transport, however, has declined from 10,000 buses to 7,000 buses. Calculate income elasticity
of demand and tell which product is a normal good and which one is inferior.