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

Some economists argue that the "animal spirits" of investors are so important in determining the level of investment in the economy that interest rates do not matter at all. Part 2 a. Suppose that this were truelong dash—that investment in no way depends on interest rates. Using the line drawing tool, show what the investment curve would look like. Label the line 'I'. is my answer correct?

Problem 3 ABC Challenges: Attrition, Balance and Compliance Can television inform people about public affairs? Political scientists Bethany Albertson and Adria Lawrence (2009) conducted an experiment in which they randomly assigned people to treatment and control groups to evaluate the effect of watching TV on a person's information level. Those assigned to the treatment group were told to watch a specific television broadcast and were later asked questions related to what they watched. Those in the control group were not shown the TV broadcast but were asked questions related to the material in the TV broadcast. The dataset contains the following variables: • • • • • • Read News: Dummy variable which =1 if a person reads news and 0 otherwise. Political Interest: interest in political affairs (not interested=1 to very interested=4) Education: years of education Female: female dummy variable (female=1; male=0) Income: family income in thousands of dollars Information Level: information…

The figure to the right gives an economy's initial aggregate demand (AD) curve. Using the line drawing tool, show an increase in aggregate demand. Properly label this line. Part 2 Note: Carefully follow the instructions above and only draw the required object. Part 3 Which of the following will generate an increase in aggregate demand? A. A decrease in the price level. B. A decrease in the money supply. C. Increased government expenditures for war. D. A tax increase.