Question

for each of the following, draw a simple linear demand curve that coincides with the (NOT Cross-price). Be sure to label yourses. Once you have drawn the grupe associated quantity as Q. Then pick a higher or lower rice and labelitas Pu Labdi of selecting two prices and quantities is to show yourself why the demand curve's elasticity op me to goods with this type of demand and curve that coincides with the indicated type of price elasticity of demand xes. Once you have draw the pick a price and label it as Po Label the belitas P. Label the associated quantity as Qi [The purpose hy the demand curve's elasticity type can be determined by its slope.] SCENARIO #1: Relatively Elastic Demand for GOOD #1: GOOD #2: Name two goods with this type of demand b. SCENARIO #2: Relatively inelastic Demand graph) GOOD #1: GOOD #2: C. SCENARIO #3: Perfectly Inelastic Demand (graph) Write two attributes of a good having perfectly inelastic demand. (Section 5.2 of the McEACHERN reading may help you. Think carefully about what such an elasticity would mean.) ATTRIBUTE #1: ATTRIBUTE 42: d. SCENARIO #4: Perfectly Elastic Demand graph) Write two attributes of a good having perfectly elastic demand. (Again, Section 5.2 of the McEACHERN reading may help you. Think carefully about what such an elasticity would mean.) ATTRIBUTE #1: ATTRIBUTE #2:

Answer 1

Part A

Relatively elastic demand

The demand is said to be relatively elastic, then the percentage change in quantity demanded is greater than the percentage change in price. Or in other words, a small change in price leads to a relatively large change in quantity demanded.

Example:

Good 1----Television Good 2---Sports car

Price PA Demand QO Quantity demanded

In the graph, if the price of good increased from P0 to P1, then the demand for good changed to Q0 to Q1. Here the quantity demanded change more than that of price change.

Part B

Relatively inelastic demand

The demand is said to be relatively inelastic, then the percentage change in quantity demanded is less than the percentage change in price. Or in other words, a large change in price leads to a relatively smaller change in quantity demanded.

Good 1---Salt Good 2----Medicines

Price Demand Q1 QO Quantity demanded

In the graph, if the price of good increased from P0 to P1, then the demand for good changed to Q0 to Q1. Here the quantity demanded change less than that of price change.

Part C

Perfectly inelastic demand

The percentage change in quantity demanded is zero and no matter how much the price changed. In the graph, the price increased from P0 to P1, then the quantity demanded is stable in all price level.

Attribute 1---Change in quantity is zero

Attribute 2--Vertical demand curve

Part D

Price Demand Quantity demanded

Perfectly elastic demand

The percentage change in quantity demanded is infinity even if the price changes to zero. In the graph, the quantity demanded is increased from P0 to P1 and the price is the same in all levels of quantity demanded.

Attribute 1---Demand is infinite

Attribute 2-- Horizontal demand curve

Price Demand Q1 Quantity demanded