When the prices of compact discs (you remember those, right?) increased from $10 to $11, the quantity of CDs demanded decreased from 100 to 87. Using the Mid-Point Method (page 99), what is the price elasticity of demand for CDs? Explain why the demand is elastic or inelastic (not just that it is greater or less than one, but what makes it elastic or inelastic)? Show your work. If you are unsure about how to determine percentages, review the appendix to Chapter One. Name a product you regularly purchase for which you have an inelastic demand and one for which you have an elastic demand. What determines whether your demand is elastic or inelastic for these products?

answer

watching

views

For unlimited access to Homework Help, a Homework+ subscription is required.

You have 0 free answers left.
Get unlimited access to 3.8 million step-by-step answers.

Get unlimited access

Already have an account? Log in

Nelly StrackeLv2

26 May 2019

Unlock all answers

Get 1 free homework help answer.

Already have an account? Log in

Related questions

Suppose that business travelers and vacationers have the following demand for airline tickets

Price Qty. Demanded (business travelers) Qty. Demanded (vacationers)

price	Tickets Demanded (business travelers)	Tickets Demanded (Vacation travelers)
150	2100	1000
200	2000	800
250	1900	600
300	1800	400

1A. As the price of tickets rises from $200 to $250, what is the price elasticity of demand for Business Travelers. Is demand elastic or inelastic? Show your work

Illustrate the demand curves on the graph.

1B. As the price of tickets rises from $200 to $250, what is the price elasticity of demand for Vacationers. Is demand elastic or inelastic? Show your work!

1C. Why might vacationers have a different elasticity than business travelers?

Suppose that your demand schedule for compact disks is as follows:

price	quantity of demanded if income = 10,000	quantity of demanded if income = 12,000
8	40	50
10	32	40
12	24	30
14	16	20
16	8	12

2A. What is the numerical income elasticity of demand as your income increases from $10,000 to $12,000 if the price of the CDs is $12*. Is this product a normal good or an inferior good based on your calculation? Show your work!

2B. What is the numerical income elasticity of demand as your income increases from $10,000 to $12,000 if the price of the CDs is $16*. Is this product a normal good or an inferior good based on your calculation? Show your work!

salmoncoyote141

Discussion #1

The law of demand states that a fall in the price of a good raises the quantity demanded, and the increase in price leads to a decrease in quantity demanded. The price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. Demand for a good is said to be elastic if the quantity demanded responds substantially to changes in the price, and the percentage change in quantity demanded is greater than the percentage change in price. Demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price, which indicates that the percentage in price is greater than the percentage in quantity demanded.

However, the extent of responsiveness of quantity demanded to a change in price depends on the nature of a particular good or service in the market. The price elasticity of demand partly depends on the availability of close substitutes. When a large number of substitutes are available, consumers respond to a higher price of a good by buying more of the substitute goods and less of the relatively more expensive good. In addition, goods or services that are considered necessities tend to have less elastic (more inelastic) demand, whereas goods or services that are considered luxuries have more elastic (less inelastic) demands.

Explain why the demand for the good or service provided by the organization you work for is elastic or inelastic. How does this influence pricing decisions?
Provide examples on how the availability of close substitutes affects price elasticity of demand.
Give specific examples of necessities or luxuries, and explain how they affect price elasticity of goods or services.

Please answer ALL bulletins and place the answers under the correct bulletin.

Step 1
Analyze gasoline price hike statistics in the following scenario.
In June 2008, the U.S. retail gas price jumped from $3 to $4 a gallon.

This is a 33% increase in price from January 2008.

During that time, the total quantity of gasoline purchased fell by 3%.

Supplies of gasoline produced also decreased from 1 million barrels to 800,000 barrels.

No viable substitute has been created to replace gasoline.

Step 2
Calculate the price elasticity of gasoline.
In a one- to two-page (250-500-word) paper, address the following. Be sure to show all work.

Calculate the price elasticity of demand for gasoline.

Calculate the elasticity of supply using the information provided.

Calculate the changes in consumer and producer surplus.

Because there is no viable substitute for gasoline at this time, what can you say about the cross-elasticity and income elasticity of supply and demand for gasoline?

Is the demand for gasoline elastic, inelastic, perfectly elastic or inelastic, or unit elastic?