Question

1) A 7-11 owner looks at her end-of-month sales. In June, the price of a Slurpee was $2.50 and the station sold 300 units. In July, the price spiked to $3.00 per Slurpee and the station sold 280 units. i) What is the price elasticity? ii) Is the product elastic or inelastic? iii) What characteristics do Slurpee have that makes the produce elastic/inelastic? 2) A large realty company looks at sales by the agents. In June 2018, it sold 480 units at an average price of $420,000. Following an interest rate hike by the FED, it finds sales in October were 435 units at $450,000 i) What is the price elasticity? ii) Is the product elastic or inelastic? iii) What characteristics does this housing market have that makes it elastic/inelastic? 3) The Trader Joes store in Long Beach in an average month sells 1200 cases of “Two Buck Chuck” at $3.00 per bottle. It holds a sale at $2.50/pound and find that it sells 1320 cases. i) What is the price elasticity? ii) Is the product elastic or inelastic? iii) What characteristics does Two Buck Chuck have that makes it elastic/inelastic? (Hint it is the cheapest wine at Trader Joe's)

Answer 1

question (0) Price is increased from $2.50 To 6 $ 3.00 sales decreased from & 300 units To 280 Chen (i) Price Price elas elasticity: Аф, Р AP & 280-300 250 o 300 - 2.50 300 -20 250 0.5 300 - 5000 -33.33 150 (ii) | Price elasticity is imbires Product is elastic ci Lower or cheafest makes star fee plastic question (2) as Averaged Price increased from $ 420,000 To $ 450,000 units Soid decreased from 480 units To U35 Price elcesticity AQ де о 435-480 420,000 ( 450,000 - 420,000) 480

-45 O 420,000 480 30,000 Price elasticity=-1-3125 (ii) (Price elasticity = 1.3125 > (ii) Large Proel Proportion of consumers income spend on this product. = elastic. Because (3) i) Price decreased from $ 3.00 To $ 2.50 Sales increased from 1846 To 1200 To 1320 Price elasticity A9 a - 1200+1320 AP 3.00 о * 2.50-3.00 1320 + 120 300 360 -0.5 1320 - 660 Poice elastici sticity= -0.54 (is I Price e vesticity I Cheapest wine There is dange 0.54 < 1 > inelastic. (ili, due To The no Chough demand increase as Price decreases