Explain
why the choice between 1, 2, 3, 4, 5, 6, and 8 “units,” or 1,000, 2,000, 3,000, 4,000, 5,000, 6,000, 7,000, and 8,000 movie tickets, makes no difference elasticity in Table 6.1. LO6.1

Explanation of Solution
Price elasticity of demand can be calculated by using the below formula:
Price elasticity of demand for changing 1 unit to 2 units can be calculated by substituting the respective values in equation (1).
Price elasticity of demand for changing the quantity from 1 to 2 is 5 (ignore the sign).
Table -1 shows the price elasticity for the demand for changing quantity from one unit to other units that was obtained by using equation (1).
Table -1
Quantity in units | Price | Elasticity |
1 | 8 | |
2 | 7 | 5 |
3 | 6 | 2.6 |
4 | 5 | 1.57 |
5 | 4 | 1 |
6 | 3 | 0.64 |
7 | 2 | 0.38 |
8 | 1 | 0.26 |
Table-2 shows the price elasticity for the demand for changing quantity from one unit to other units that was obtained by using equation (1).
Table -2
Quantity (Actual) | Price | Elasticity |
1,000 | 8 | |
2,000 | 7 | 5 |
3,000 | 6 | 2.6 |
4,000 | 5 | 1.57 |
5,000 | 4 | 1 |
6,000 | 3 | 0.64 |
7,000 | 2 | 0.38 |
8,000 | 1 | 0.26 |
Table-1 and Table-2 clearly show that the elasticity of demand is the same regardless of the demand quantity in units or quantity demand in actual numbers. Thus, it makes no difference in determining price elasticity of demand for both the cases.
Concept introduction:
Price elasticity of demand: Price elasticity of demand is defined as the percentage change in the quantity demanded due to percentage change in price. In other words, price elasticity of demand represents the relationship between change in quantity of a specific good and the price change.
Want to see more full solutions like this?
Chapter 6 Solutions
ECO 2010 INCLUSIVE ACCESS
- 1. We want to examine the comparative statics of the Black Scholes model. Complete the following table using the Excel model from class or another of your choice. Provide the call premium and the put premium for each scenario. Underlier Risk-free Scenario price rate Volatility Time to expiration Strike Call premium Put premium Baseline $50 5% 25% 1 year $55 Higher strike $50 5% 25% 1 year $60 Higher volatility $50 5% 40% 1 year $55 Higher risk free $50 8% 25% 1 year $55 More time $50 5% 25% 2 years $55 2. Look at the baseline scenario. a. What is the probability that the call is exercised in the baseline scenario? b. What is the probability that the put is exercised? c. Explain why the probabilities sum to 1.arrow_forwardSome people say that since inflation can be reduced in the long run without an increase in unemployment, we should reduce inflation to zero. Others believe that a steady rate of inflation at, say, 3 percent, should be our goal. What are the pros and cons of these two arguments? What, in your opinion, are good long-run goals for reducing inflation and unemployment?arrow_forwardExplain in words how investment multiplier and the interest sensitivity of aggregate demand affect the slope of the IS curve. Explain in words how and why the income and interest sensitivities of the demand for real balances affect the slope of the LM curve. According to the IS–LM model, what happens to the interest rate, income, consumption, and investment under the following circumstances?a. The central bank increases the money supply.b. The government increases government purchases.c. The government increases taxes.arrow_forward
- Suppose that a person’s wealth is $50,000 and that her yearlyincome is $60,000. Also suppose that her money demand functionis given by Md = $Y10.35 - i2Derive the demand for bonds. Suppose the interest rate increases by 10 percentage points. What is the effect on her demand for bonds?b. What are the effects of an increase in income on her demand for money and her demand for bonds? Explain in wordsarrow_forwardImagine you are a world leader and you just viewed this presentation as part of the United Nations Sustainable Development Goal Meeting. Summarize your findings https://www.youtube.com/watch?v=v7WUpgPZzpIarrow_forwardPlease draw a standard Commercial Bank Balance Sheet and briefly explain each of the main components.arrow_forward
- Please draw the Federal Reserve System’s Balance Sheet and briefly explain each of the main components.arrow_forward19. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. How does the Federal Reserve currently get the federal funds rate where they want it to be?arrow_forward18. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. Carefully compare and contrast fiscal policy and monetary policy.arrow_forward
- 15. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. What are the common arguments for and against high levels of federal debt?arrow_forward17. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. Explain the difference between present value and future value. Be sure to use and explain the mathematical formulas for both. How does one interpret these formulas?arrow_forward12. Give the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. Show and carefully explain the Taylor rule and all of its components, used as a monetary policy guide.arrow_forward
- Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax
- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning





