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Test Yourself
1.
2.
12
11
10
3.
B 4.
A
9
Price
8
7
6
Calculate the arc own price elasticity of
demand between the points A and B?
Is the elasticity different if your go from
B to A?
Elastic, inelastic, or unit? Why?
If at point B and your goal is to increase
revenues should you increase or
decrease price?
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1
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Quantity
Test Yourself
1.
2.
3.
4.
12
11
10
A
9
B
8
Price
Calculate the arc own price elasticity of demand
between the points B and A?
Is the elasticity different if you go from A to B?
Elastic, inelastic, or unit? Why?
If at point B and your goal is to increase revenues
should you increase or decrease price?
Answers
1. (4/6)/(-2/8)= -0.375
2. No
3. Inelastic
4. Increase price
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2
1
0
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Quantity
Test Yourself
1.
The calculated own price elasticity of demand for salt
is -0.1, whereas, the elasticity for fresh green peas is
-2.8. Why is salt more inelastic than fresh green
peas?
2.
The short-run and long-run own price elasticities for
gasoline are -0.2 and -0.7. Why the difference?
Test Yourself
1.
The calculated own price elasticity of demand for salt is -0.1,
whereas, the elasticity for fresh green peas is -2.8. Why is the
salt elasticity more inelastic than fresh green peas?
2.
The short-run and long-run own price elasticities for gasoline
are -0.2 and -0.7. Why the difference?
1. Salt has fewer substitutes, is required to live, and is a
very small percentage of total income.
2. Long-run elasticities are more elastic as consumers
have time to adjust their consumption bundles.