The nature of price elasticity of demand in the flowing cases: “The pizza delivery business in this town is very completive. I’d lose half my customers if I raised the price by as little as 10%.” “I owned both the two Jerry Garcia autographed lithographs in existence. I sold one on eBay for a high price. But when I sold the second one, the price dropped by 80%.” “My economic professor has chosen to use Krugman/Wells textbook for this class. I have no choice but to buy this book.” “I always spend a total of exactly $10 per week on coffee.” Concept Introduction: Elastic Demand: If the quantity demand falls/ rises more than proportionately to the rise/fall in price then, the demand is said to be elastic. Elastic demand usually has an absolute value more than 1. Inelastic Demand : If the quantity demand falls/ rises less than proportionately to the rise/fall in price then, the demand is said to be inelastic. Inelastic demand usually has an absolute value less than 1. If with the change in the price of the product there is no change in the quantity demanded, then the demand is perfectly inelastic. Unitary Elastic Demand: If the quantity demand falls/ rises proportionately to the rise/fall in price then, the demand is said to be unitary elastic and its absolute value is 1.

Question

Want to see the full answer?

Answer 1

Question

Chapter 6, Problem 5P

To determine

The nature of price elasticity of demand in the flowing cases:

“The pizza delivery business in this town is very completive. I’d lose half my customers if I raised the price by as little as 10%.”

“I owned both the two Jerry Garcia autographed lithographs in existence. I sold one on eBay for a high price. But when I sold the second one, the price dropped by 80%.”

“My economic professor has chosen to use Krugman/Wells textbook for this class. I have no choice but to buy this book.”

“I always spend a total of exactly $10 per week on coffee.”

Concept Introduction:

Elastic Demand:

If the quantity demand falls/ rises more than proportionately to the rise/fall in price then, the demand is said to be elastic. Elastic demand usually has an absolute value more than 1.

Inelastic Demand:

If the quantity demand falls/ rises less than proportionately to the rise/fall in price then, the demand is said to be inelastic. Inelastic demand usually has an absolute value less than 1. If with the change in the price of the product there is no change in the quantity demanded, then the demand is perfectly inelastic.

Unitary Elastic Demand:

If the quantity demand falls/ rises proportionately to the rise/fall in price then, the demand is said to be unitary elastic and its absolute value is 1.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Respond to Luis Rodriguez I recommend Mrs. Ibrahim's proposal to lower interest rates as the more effective approach for fostering economic growth in Sudan. Sustainable Growth - Lowering interest rates encourages investment in productive capacity, which can lead to long-term economic growth rather than a temporary boost from cash transfers. Job Creation - This approach can create more stable employment opportunities by promoting business expansion through lower borrowing costs. Addressing Structural Issues - Lower interest rates can help address underlying structural issues in the economy, such as low production levels, by incentivizing businesses to invest in technology and infrastructure. Inflation Control - While there is a risk of inflation if appropriately managed, focusing on productive investments can help mitigate this risk compared to the potential inflationary effects of direct cash transfers. In conclusion, while both proposals have merit, Mrs. Ibrahim's approach of…

Consider the competitive market for rhodium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph. 100 90 80 70 COSTS (Dollars per pound) 8 50 40 ຊ 20 10, 10 10 + MC ATC AVC Π 0 0 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of pounds) (?)

3. Uncle Mateo loves shoes and high unemployment. Uncle Mateo owns a small shoe factory in Argentina. His business is doing fairly well, especially because prices in Argentina have been falling, including the cost of labor too, since August of 2024. The date is September 1, 2024, and uncle Mateo texted you the following message in an effort to seek your advice about a new policy the government there is intending to implement to deal with high unemployment rates that started to creep up in early 2024: "Hola (hello) dear niece, As you know, prices in Argentina have been falling recently, which is great because I can now hire more people and buy material cheaper than I used to. Also, I was able to find more workers at lower pay because this unemployment rate has been rising. However, some crazy government people want to change things. I don’t know exactly how their ideas will affect me in the long run, but I am worried. They basically want to lower the unemployment rate, and I might have…