(a) Price elasticity when price changes by $5.

Question

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Answer 1

Question

Chapter 20, Problem 1E

To determine

(a)

Price elasticity when price changes by $5.

Expert Solution

Answer to Problem 1E

At price $10 per unit, price elasticity of demand -0.71.

At price $15, price elasticity of demand = -1.4.

At price $20 per unit, the price elasticity of demand = -3.

At price $25 per unit, price elasticity of demand = -3.67

Explanation of Solution

The arc or mid-point elasticity is calculated in the following way:

Elasticity of Demand (E_d) as per mid-point method:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)/2(Q2+Q1)/2

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

At price $5 per unit, quantity demanded is 100 units, and at price $10 per unit quantity demanded = 80 unit, thus, the elasticity at first point = $5 per unit where price = $5 per unit and quantity demanded = 100 units

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

P₁= $5, Q₁ = 100

P₂ = $10, Q₂= 80

Ed= (80−100)(10−5)×(10+5)(80+100)

Ed= −205×15180 = −0.33

Thus, E_d= -0.33

At price $10 per unit, quantity demanded 80 units, elasticity of demand is calculated as follows:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (60−80)(15−10)×( 15+10)(80+60)Ed= −205×25140 = −0.71

At price $10 per unit, price elasticity of demand -0.71.

At price $15 per unit, quantity demanded = 60 units, so elasticity is calculated as follows:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (40−60)(20−15)×( 15+20)(60+40)Ed= −205×35100 = −1.4

At price $15, price elasticity of demand = -1.4.

At price $20 per unit, quantity demanded = 40 units, elasticity is calculated as follows:

Ed= (20−40)(25−20)×( 20+25)(40+20)Ed= −205×4560 = −3

At price $20 per unit, the price elasticity of demand = -3.

At price $25 per unit, the quantity of demand = 20 units, so, elasticity is calculated as:

Ed= (10−20)(30−25)×( 25+30)(20+10)Ed= −105×5530 = −3.67

At price $25 per unit, price elasticity of demand = -3.67

Economics Concept Introduction

Introduction:

The arc or mid-point elasticity is calculated in the following way:

Elasticity of Demand (E_d) as per mid-point method:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)/2(Q2+Q1)/2

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

To determine

(b)

Price elasticity when price changes by $10.

Expert Solution

Answer to Problem 1E

At price $5 with price changes of $10, price elasticity of demand is -0.5.

At price $10 with price changes of $10, price elasticity of demand = -1

At price $15 with price changes of $10, price elasticity of demand is -2.

At price changes $10, the price elasticity of demand is -3.

Explanation of Solution

Using price changes of $10, we compare the price and quantity changes with $10 increments.

E_d as per mid-point method.

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

At price $5 per unit, the quantity demanded is 100 units and at price $15 per unit, the quantity demanded is 60 units, thus elasticity at $5 per unit is:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (60−100)(15−5)×( 5+15)(100+60)Ed= −4010×20160 = −0.5

Thus, at price $5 with price changes of $10, price elasticity of demand is -0.5

At price of $10 per unit. Quantity demanded = 80 unit and at price = $20 per unit, quantity demanded= 40 units, thus, elasticity at $10 per unit is:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (40−80)(20−10)×( 10+20)(80+40)Ed= −4010×30120 = −1

At price $10 with price changes of $10, price elasticity of demand = -1

At price $15 per unit, quantity demanded= 60 units and at price $25 per unit, quantity demanded = 20 units, thus elasticity at $15 per unit is:

Ed= (20−60)(25−15)×( 15+25)(60+20)Ed= −4010×4080 = −2

Thus, at price $15 with price changes of $10, price elasticity of demand is -2.

At price $20 per unit, quantity demanded = 40 units and at price = $30 per unit, quantity demanded = 10 units, thus elasticity at $20 per unit.

Ed= (10−40)(30−20)×( 20+30)(40+10)Ed= −3010×5050 = −3

Thus, at price changes $10, the price elasticity of demand is -3.

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Answer

M” method Given the following model, solve by the method of “M”. (see image)

As indicated in the attached image, U.S. earnings for high- and low-skill workers as measured by educational attainment began diverging in the 1980s. The remaining questions in this problem set use the model for the labor market developed in class to walk through potential explanations for this trend. 1. Assume that there are just two types of workers, low- and high-skill. As a result, there are two labor markets: supply and demand for low-skill workers and supply and demand for high-skill workers. Using two carefully drawn labor-market figures, show that an increase in the demand for high skill workers can explain an increase in the relative wage of high-skill workers. 2. Using the same assumptions as in the previous question, use two carefully drawn labor-market figures to show that an increase in the supply of low-skill workers can explain an increase in the relative wage of high-skill workers.

Answer 2

Question

Chapter 20, Problem 1E

To determine

(a)

Price elasticity when price changes by $5.

Expert Solution

Answer to Problem 1E

At price $10 per unit, price elasticity of demand -0.71.

At price $15, price elasticity of demand = -1.4.

At price $20 per unit, the price elasticity of demand = -3.

At price $25 per unit, price elasticity of demand = -3.67

Explanation of Solution

The arc or mid-point elasticity is calculated in the following way:

Elasticity of Demand (E_d) as per mid-point method:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)/2(Q2+Q1)/2

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

At price $5 per unit, quantity demanded is 100 units, and at price $10 per unit quantity demanded = 80 unit, thus, the elasticity at first point = $5 per unit where price = $5 per unit and quantity demanded = 100 units

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

P₁= $5, Q₁ = 100

P₂ = $10, Q₂= 80

Ed= (80−100)(10−5)×(10+5)(80+100)

Ed= −205×15180 = −0.33

Thus, E_d= -0.33

At price $10 per unit, quantity demanded 80 units, elasticity of demand is calculated as follows:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (60−80)(15−10)×( 15+10)(80+60)Ed= −205×25140 = −0.71

At price $10 per unit, price elasticity of demand -0.71.

At price $15 per unit, quantity demanded = 60 units, so elasticity is calculated as follows:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (40−60)(20−15)×( 15+20)(60+40)Ed= −205×35100 = −1.4

At price $15, price elasticity of demand = -1.4.

At price $20 per unit, quantity demanded = 40 units, elasticity is calculated as follows:

Ed= (20−40)(25−20)×( 20+25)(40+20)Ed= −205×4560 = −3

At price $20 per unit, the price elasticity of demand = -3.

At price $25 per unit, the quantity of demand = 20 units, so, elasticity is calculated as:

Ed= (10−20)(30−25)×( 25+30)(20+10)Ed= −105×5530 = −3.67

At price $25 per unit, price elasticity of demand = -3.67

Economics Concept Introduction

Introduction:

The arc or mid-point elasticity is calculated in the following way:

Elasticity of Demand (E_d) as per mid-point method:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)/2(Q2+Q1)/2

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

To determine

(b)

Price elasticity when price changes by $10.

Expert Solution

Answer to Problem 1E

At price $5 with price changes of $10, price elasticity of demand is -0.5.

At price $10 with price changes of $10, price elasticity of demand = -1

At price $15 with price changes of $10, price elasticity of demand is -2.

At price changes $10, the price elasticity of demand is -3.

Explanation of Solution

Using price changes of $10, we compare the price and quantity changes with $10 increments.

E_d as per mid-point method.

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

At price $5 per unit, the quantity demanded is 100 units and at price $15 per unit, the quantity demanded is 60 units, thus elasticity at $5 per unit is:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (60−100)(15−5)×( 5+15)(100+60)Ed= −4010×20160 = −0.5

Thus, at price $5 with price changes of $10, price elasticity of demand is -0.5

At price of $10 per unit. Quantity demanded = 80 unit and at price = $20 per unit, quantity demanded= 40 units, thus, elasticity at $10 per unit is:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (40−80)(20−10)×( 10+20)(80+40)Ed= −4010×30120 = −1

At price $10 with price changes of $10, price elasticity of demand = -1

At price $15 per unit, quantity demanded= 60 units and at price $25 per unit, quantity demanded = 20 units, thus elasticity at $15 per unit is:

Ed= (20−60)(25−15)×( 15+25)(60+20)Ed= −4010×4080 = −2

Thus, at price $15 with price changes of $10, price elasticity of demand is -2.

At price $20 per unit, quantity demanded = 40 units and at price = $30 per unit, quantity demanded = 10 units, thus elasticity at $20 per unit.

Ed= (10−40)(30−20)×( 20+30)(40+10)Ed= −3010×5050 = −3

Thus, at price changes $10, the price elasticity of demand is -3.

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Answer 3

Question

Chapter 20, Problem 1E

To determine

(a)

Price elasticity when price changes by $5.

Expert Solution

Answer to Problem 1E

At price $10 per unit, price elasticity of demand -0.71.

At price $15, price elasticity of demand = -1.4.

At price $20 per unit, the price elasticity of demand = -3.

At price $25 per unit, price elasticity of demand = -3.67

Explanation of Solution

The arc or mid-point elasticity is calculated in the following way:

Elasticity of Demand (E_d) as per mid-point method:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)/2(Q2+Q1)/2

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

At price $5 per unit, quantity demanded is 100 units, and at price $10 per unit quantity demanded = 80 unit, thus, the elasticity at first point = $5 per unit where price = $5 per unit and quantity demanded = 100 units

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

P₁= $5, Q₁ = 100

P₂ = $10, Q₂= 80

Ed= (80−100)(10−5)×(10+5)(80+100)

Ed= −205×15180 = −0.33

Thus, E_d= -0.33

At price $10 per unit, quantity demanded 80 units, elasticity of demand is calculated as follows:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (60−80)(15−10)×( 15+10)(80+60)Ed= −205×25140 = −0.71

At price $10 per unit, price elasticity of demand -0.71.

At price $15 per unit, quantity demanded = 60 units, so elasticity is calculated as follows:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (40−60)(20−15)×( 15+20)(60+40)Ed= −205×35100 = −1.4

At price $15, price elasticity of demand = -1.4.

At price $20 per unit, quantity demanded = 40 units, elasticity is calculated as follows:

Ed= (20−40)(25−20)×( 20+25)(40+20)Ed= −205×4560 = −3

At price $20 per unit, the price elasticity of demand = -3.

At price $25 per unit, the quantity of demand = 20 units, so, elasticity is calculated as:

Ed= (10−20)(30−25)×( 25+30)(20+10)Ed= −105×5530 = −3.67

At price $25 per unit, price elasticity of demand = -3.67

Economics Concept Introduction

Introduction:

The arc or mid-point elasticity is calculated in the following way:

Elasticity of Demand (E_d) as per mid-point method:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)/2(Q2+Q1)/2

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

To determine

(b)

Price elasticity when price changes by $10.

Expert Solution

Answer to Problem 1E

At price $5 with price changes of $10, price elasticity of demand is -0.5.

At price $10 with price changes of $10, price elasticity of demand = -1

At price $15 with price changes of $10, price elasticity of demand is -2.

At price changes $10, the price elasticity of demand is -3.

Explanation of Solution

Using price changes of $10, we compare the price and quantity changes with $10 increments.

E_d as per mid-point method.

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

At price $5 per unit, the quantity demanded is 100 units and at price $15 per unit, the quantity demanded is 60 units, thus elasticity at $5 per unit is:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (60−100)(15−5)×( 5+15)(100+60)Ed= −4010×20160 = −0.5

Thus, at price $5 with price changes of $10, price elasticity of demand is -0.5

At price of $10 per unit. Quantity demanded = 80 unit and at price = $20 per unit, quantity demanded= 40 units, thus, elasticity at $10 per unit is:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (40−80)(20−10)×( 10+20)(80+40)Ed= −4010×30120 = −1

At price $10 with price changes of $10, price elasticity of demand = -1

At price $15 per unit, quantity demanded= 60 units and at price $25 per unit, quantity demanded = 20 units, thus elasticity at $15 per unit is:

Ed= (20−60)(25−15)×( 15+25)(60+20)Ed= −4010×4080 = −2

Thus, at price $15 with price changes of $10, price elasticity of demand is -2.

At price $20 per unit, quantity demanded = 40 units and at price = $30 per unit, quantity demanded = 10 units, thus elasticity at $20 per unit.

Ed= (10−40)(30−20)×( 20+30)(40+10)Ed= −3010×5050 = −3

Thus, at price changes $10, the price elasticity of demand is -3.

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Answer 4

Question

Chapter 20, Problem 1E

To determine

(a)

Price elasticity when price changes by $5.

Expert Solution

Answer to Problem 1E

At price $10 per unit, price elasticity of demand -0.71.

At price $15, price elasticity of demand = -1.4.

At price $20 per unit, the price elasticity of demand = -3.

At price $25 per unit, price elasticity of demand = -3.67

Explanation of Solution

The arc or mid-point elasticity is calculated in the following way:

Elasticity of Demand (E_d) as per mid-point method:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)/2(Q2+Q1)/2

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

At price $5 per unit, quantity demanded is 100 units, and at price $10 per unit quantity demanded = 80 unit, thus, the elasticity at first point = $5 per unit where price = $5 per unit and quantity demanded = 100 units

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

P₁= $5, Q₁ = 100

P₂ = $10, Q₂= 80

Ed= (80−100)(10−5)×(10+5)(80+100)

Ed= −205×15180 = −0.33

Thus, E_d= -0.33

At price $10 per unit, quantity demanded 80 units, elasticity of demand is calculated as follows:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (60−80)(15−10)×( 15+10)(80+60)Ed= −205×25140 = −0.71

At price $10 per unit, price elasticity of demand -0.71.

At price $15 per unit, quantity demanded = 60 units, so elasticity is calculated as follows:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (40−60)(20−15)×( 15+20)(60+40)Ed= −205×35100 = −1.4

At price $15, price elasticity of demand = -1.4.

At price $20 per unit, quantity demanded = 40 units, elasticity is calculated as follows:

Ed= (20−40)(25−20)×( 20+25)(40+20)Ed= −205×4560 = −3

At price $20 per unit, the price elasticity of demand = -3.

At price $25 per unit, the quantity of demand = 20 units, so, elasticity is calculated as:

Ed= (10−20)(30−25)×( 25+30)(20+10)Ed= −105×5530 = −3.67

At price $25 per unit, price elasticity of demand = -3.67

Economics Concept Introduction

Introduction:

The arc or mid-point elasticity is calculated in the following way:

Elasticity of Demand (E_d) as per mid-point method:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)/2(Q2+Q1)/2

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

To determine

(b)

Price elasticity when price changes by $10.

Expert Solution

Answer to Problem 1E

At price $5 with price changes of $10, price elasticity of demand is -0.5.

At price $10 with price changes of $10, price elasticity of demand = -1

At price $15 with price changes of $10, price elasticity of demand is -2.

At price changes $10, the price elasticity of demand is -3.

Explanation of Solution

Using price changes of $10, we compare the price and quantity changes with $10 increments.

E_d as per mid-point method.

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

At price $5 per unit, the quantity demanded is 100 units and at price $15 per unit, the quantity demanded is 60 units, thus elasticity at $5 per unit is:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (60−100)(15−5)×( 5+15)(100+60)Ed= −4010×20160 = −0.5

Thus, at price $5 with price changes of $10, price elasticity of demand is -0.5

At price of $10 per unit. Quantity demanded = 80 unit and at price = $20 per unit, quantity demanded= 40 units, thus, elasticity at $10 per unit is:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (40−80)(20−10)×( 10+20)(80+40)Ed= −4010×30120 = −1

At price $10 with price changes of $10, price elasticity of demand = -1

At price $15 per unit, quantity demanded= 60 units and at price $25 per unit, quantity demanded = 20 units, thus elasticity at $15 per unit is:

Ed= (20−60)(25−15)×( 15+25)(60+20)Ed= −4010×4080 = −2

Thus, at price $15 with price changes of $10, price elasticity of demand is -2.

At price $20 per unit, quantity demanded = 40 units and at price = $30 per unit, quantity demanded = 10 units, thus elasticity at $20 per unit.

Ed= (10−40)(30−20)×( 20+30)(40+10)Ed= −3010×5050 = −3

Thus, at price changes $10, the price elasticity of demand is -3.

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Answer 5

Chapter 20, Problem 1E

To determine

(a)

Price elasticity when price changes by $5.

Expert Solution

Answer to Problem 1E

At price $10 per unit, price elasticity of demand -0.71.

At price $15, price elasticity of demand = -1.4.

At price $20 per unit, the price elasticity of demand = -3.

At price $25 per unit, price elasticity of demand = -3.67

Explanation of Solution

The arc or mid-point elasticity is calculated in the following way:

Elasticity of Demand (E_d) as per mid-point method:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)/2(Q2+Q1)/2

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

At price $5 per unit, quantity demanded is 100 units, and at price $10 per unit quantity demanded = 80 unit, thus, the elasticity at first point = $5 per unit where price = $5 per unit and quantity demanded = 100 units

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

P₁= $5, Q₁ = 100

P₂ = $10, Q₂= 80

Ed= (80−100)(10−5)×(10+5)(80+100)

Ed= −205×15180 = −0.33

Thus, E_d= -0.33

At price $10 per unit, quantity demanded 80 units, elasticity of demand is calculated as follows:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (60−80)(15−10)×( 15+10)(80+60)Ed= −205×25140 = −0.71

At price $10 per unit, price elasticity of demand -0.71.

At price $15 per unit, quantity demanded = 60 units, so elasticity is calculated as follows:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (40−60)(20−15)×( 15+20)(60+40)Ed= −205×35100 = −1.4

At price $15, price elasticity of demand = -1.4.

At price $20 per unit, quantity demanded = 40 units, elasticity is calculated as follows:

Ed= (20−40)(25−20)×( 20+25)(40+20)Ed= −205×4560 = −3

At price $20 per unit, the price elasticity of demand = -3.

At price $25 per unit, the quantity of demand = 20 units, so, elasticity is calculated as:

Ed= (10−20)(30−25)×( 25+30)(20+10)Ed= −105×5530 = −3.67

At price $25 per unit, price elasticity of demand = -3.67

Economics Concept Introduction

Introduction:

The arc or mid-point elasticity is calculated in the following way:

Elasticity of Demand (E_d) as per mid-point method:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)/2(Q2+Q1)/2

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

To determine

(b)

Price elasticity when price changes by $10.

Expert Solution

Answer to Problem 1E

At price $5 with price changes of $10, price elasticity of demand is -0.5.

At price $10 with price changes of $10, price elasticity of demand = -1

At price $15 with price changes of $10, price elasticity of demand is -2.

At price changes $10, the price elasticity of demand is -3.

Explanation of Solution

Using price changes of $10, we compare the price and quantity changes with $10 increments.

E_d as per mid-point method.

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

At price $5 per unit, the quantity demanded is 100 units and at price $15 per unit, the quantity demanded is 60 units, thus elasticity at $5 per unit is:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (60−100)(15−5)×( 5+15)(100+60)Ed= −4010×20160 = −0.5

Thus, at price $5 with price changes of $10, price elasticity of demand is -0.5

At price of $10 per unit. Quantity demanded = 80 unit and at price = $20 per unit, quantity demanded= 40 units, thus, elasticity at $10 per unit is:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (40−80)(20−10)×( 10+20)(80+40)Ed= −4010×30120 = −1

At price $10 with price changes of $10, price elasticity of demand = -1

At price $15 per unit, quantity demanded= 60 units and at price $25 per unit, quantity demanded = 20 units, thus elasticity at $15 per unit is:

Ed= (20−60)(25−15)×( 15+25)(60+20)Ed= −4010×4080 = −2

Thus, at price $15 with price changes of $10, price elasticity of demand is -2.

At price $20 per unit, quantity demanded = 40 units and at price = $30 per unit, quantity demanded = 10 units, thus elasticity at $20 per unit.

Ed= (10−40)(30−20)×( 20+30)(40+10)Ed= −3010×5050 = −3

Thus, at price changes $10, the price elasticity of demand is -3.

Answer 6

Chapter 20, Problem 1E

To determine

(a)

Price elasticity when price changes by $5.

Expert Solution

Answer to Problem 1E

At price $10 per unit, price elasticity of demand -0.71.

At price $15, price elasticity of demand = -1.4.

At price $20 per unit, the price elasticity of demand = -3.

At price $25 per unit, price elasticity of demand = -3.67

Explanation of Solution

The arc or mid-point elasticity is calculated in the following way:

Elasticity of Demand (E_d) as per mid-point method:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)/2(Q2+Q1)/2

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

At price $5 per unit, quantity demanded is 100 units, and at price $10 per unit quantity demanded = 80 unit, thus, the elasticity at first point = $5 per unit where price = $5 per unit and quantity demanded = 100 units

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

P₁= $5, Q₁ = 100

P₂ = $10, Q₂= 80

Ed= (80−100)(10−5)×(10+5)(80+100)

Ed= −205×15180 = −0.33

Thus, E_d= -0.33

At price $10 per unit, quantity demanded 80 units, elasticity of demand is calculated as follows:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (60−80)(15−10)×( 15+10)(80+60)Ed= −205×25140 = −0.71

At price $10 per unit, price elasticity of demand -0.71.

At price $15 per unit, quantity demanded = 60 units, so elasticity is calculated as follows:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (40−60)(20−15)×( 15+20)(60+40)Ed= −205×35100 = −1.4

At price $15, price elasticity of demand = -1.4.

At price $20 per unit, quantity demanded = 40 units, elasticity is calculated as follows:

Ed= (20−40)(25−20)×( 20+25)(40+20)Ed= −205×4560 = −3

At price $20 per unit, the price elasticity of demand = -3.

At price $25 per unit, the quantity of demand = 20 units, so, elasticity is calculated as:

Ed= (10−20)(30−25)×( 25+30)(20+10)Ed= −105×5530 = −3.67

At price $25 per unit, price elasticity of demand = -3.67

Economics Concept Introduction

Introduction:

The arc or mid-point elasticity is calculated in the following way:

Elasticity of Demand (E_d) as per mid-point method:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)/2(Q2+Q1)/2

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

Answer 7

Chapter 20, Problem 1E

To determine

(a)

Price elasticity when price changes by $5.

Answer 8

Expert Solution

Answer to Problem 1E

At price $10 per unit, price elasticity of demand -0.71.

At price $15, price elasticity of demand = -1.4.

At price $20 per unit, the price elasticity of demand = -3.

At price $25 per unit, price elasticity of demand = -3.67

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

The arc or mid-point elasticity is calculated in the following way:

Elasticity of Demand (E_d) as per mid-point method:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)/2(Q2+Q1)/2

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

At price $5 per unit, quantity demanded is 100 units, and at price $10 per unit quantity demanded = 80 unit, thus, the elasticity at first point = $5 per unit where price = $5 per unit and quantity demanded = 100 units

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

P₁= $5, Q₁ = 100

P₂ = $10, Q₂= 80

Ed= (80−100)(10−5)×(10+5)(80+100)

Ed= −205×15180 = −0.33

Thus, E_d= -0.33

At price $10 per unit, quantity demanded 80 units, elasticity of demand is calculated as follows:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (60−80)(15−10)×( 15+10)(80+60)Ed= −205×25140 = −0.71

At price $10 per unit, price elasticity of demand -0.71.

At price $15 per unit, quantity demanded = 60 units, so elasticity is calculated as follows:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (40−60)(20−15)×( 15+20)(60+40)Ed= −205×35100 = −1.4

At price $15, price elasticity of demand = -1.4.

At price $20 per unit, quantity demanded = 40 units, elasticity is calculated as follows:

Ed= (20−40)(25−20)×( 20+25)(40+20)Ed= −205×4560 = −3

At price $20 per unit, the price elasticity of demand = -3.

At price $25 per unit, the quantity of demand = 20 units, so, elasticity is calculated as:

Ed= (10−20)(30−25)×( 25+30)(20+10)Ed= −105×5530 = −3.67

At price $25 per unit, price elasticity of demand = -3.67

Answer 13

Economics Concept Introduction

Introduction:

The arc or mid-point elasticity is calculated in the following way:

Elasticity of Demand (E_d) as per mid-point method:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)/2(Q2+Q1)/2

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

Answer 14

To determine

(b)

Price elasticity when price changes by $10.

Expert Solution

Answer to Problem 1E

At price $5 with price changes of $10, price elasticity of demand is -0.5.

At price $10 with price changes of $10, price elasticity of demand = -1

At price $15 with price changes of $10, price elasticity of demand is -2.

At price changes $10, the price elasticity of demand is -3.

Explanation of Solution

Using price changes of $10, we compare the price and quantity changes with $10 increments.

E_d as per mid-point method.

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

At price $5 per unit, the quantity demanded is 100 units and at price $15 per unit, the quantity demanded is 60 units, thus elasticity at $5 per unit is:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (60−100)(15−5)×( 5+15)(100+60)Ed= −4010×20160 = −0.5

Thus, at price $5 with price changes of $10, price elasticity of demand is -0.5

At price of $10 per unit. Quantity demanded = 80 unit and at price = $20 per unit, quantity demanded= 40 units, thus, elasticity at $10 per unit is:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Ed= (40−80)(20−10)×( 10+20)(80+40)Ed= −4010×30120 = −1

At price $10 with price changes of $10, price elasticity of demand = -1

At price $15 per unit, quantity demanded= 60 units and at price $25 per unit, quantity demanded = 20 units, thus elasticity at $15 per unit is:

Ed= (20−60)(25−15)×( 15+25)(60+20)Ed= −4010×4080 = −2

Thus, at price $15 with price changes of $10, price elasticity of demand is -2.

At price $20 per unit, quantity demanded = 40 units and at price = $30 per unit, quantity demanded = 10 units, thus elasticity at $20 per unit.

Ed= (10−40)(30−20)×( 20+30)(40+10)Ed= −3010×5050 = −3

Thus, at price changes $10, the price elasticity of demand is -3.

Answer 15

To determine

(b)

Price elasticity when price changes by $10.

Answer 16

Expert Solution

Answer to Problem 1E

At price $5 with price changes of $10, price elasticity of demand is -0.5.

At price $10 with price changes of $10, price elasticity of demand = -1

At price $15 with price changes of $10, price elasticity of demand is -2.

At price changes $10, the price elasticity of demand is -3.

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Expert Solution

Answer 20

Explanation of Solution

Using price changes of $10, we compare the price and quantity changes with $10 increments.

E_d as per mid-point method.

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)

Where E_d = coefficient of elasticity

P₁ = Initial Price

P₂ = New Price

Q₁ = Initial Quantity

Q₂ = New Quantity

At price $5 per unit, the quantity demanded is 100 units and at price $15 per unit, the quantity demanded is 60 units, thus elasticity at $5 per unit is:

Ed= (Q2−Q1)(P2−P1)×(P2+P1)(Q2+Q1)