Question

1. What is meant by price elasticity? 2. Define the terms elastic and inelastic (in words). 3. What range or price elasticity coefficients correspond to the following: a. elastic demand b. inelastic demand c. unit elasticity 4. What does it mean to say that a product is perfectly inelastic? Provide examples. 5. Explain the relationship between total revenue and elasticity. What will happen to total revenue when price is increased for a product with elastic demand? Inelastic demand? Unit elastic demand? 6. What factors influence the price elasticity of demand of a particular product? 7. Complete the following table using the demand data given. Compute total revenue at each for the seven prices and the price elasticity coefficient for each change in price. (Elasticity coefficient goes in the blank between prices.) In the last column, indicate whether demand is elastic, unit elastic, or inelastic for that price change. Elasticity Character Total Quantity Price Coefficient of Demand Demanded Revenue (S) $1.00 300 .90 400 500 .80 600 60 700 800 .50 .40 900 8. In question 7 is the slope constant? Is the elasticity constant? 70

Answer 1

Answer - (1) Price Elasticity - Price ela dicity is measure of how Me demand changes fet a change for a particular gealsh (2) Elastic – Elastic is a term used in economics to describe a Change in the behavior of buyers and sellers in response to à change in price for a good or service. Inelastic – An elastic product is one that congurrezjantinue to purchase even after a change in price, (3) Range pe price elasticity officients - Perfectly Elastic (0) ca Elastic demand - I Relatively Elastic (128200) Cb) Inelastic demand T Perfectly Inelastic co cc) Unit elasticity –(1) L Relatively Inelcytic couvel) (4) Perfectly inelastic Slipply - When quantity supplied does not change at all in response to a change in price of the commodity, its supply is said to be perfectly inelarie supply. Example - Nuclear poweee - Aged it takes a lot of time to buld up, so no matter how much price inczeove, quantity supplied coming be inveenved immediately, it talkies a lot of time. perfectly inelastic demand - The quantity deminded desn' Change'recith a change in price. Example - The demand for salt is one such example of peefently inelastic demand. If the price of Salt feills people would not start consuming more and more oft, since the lody requires jest ceetain amorult of salt.' Similarly seven if the price rise, the demand will not full