Economics I
Professor Gunter
TA: Chris Zwicker
Problem Set #3: Elasticity
Your Aunt Mildred LOVES to read trashy novels at the beach during
her summer vacation. Here is a graph of her demand:
Now Milly used to buy her trashy
novels from a used book store on
Packer Ave, which closed two
weeks ago.
Now Milly is forced
to fill her consumption needs by
visiting the overpriced
bookstore at Lehigh University.
The used bookstore charged $1.00
for this drivel, and the
University store charges $5.00
for the same books.
1.
How many books did Milly used to buy from the used book store?
When Price = $1, Q = 15 books
2.
How will the closure of the used bookstore affect her
consumption (what is new Q)?
When Price = $5, Q = 3 books
3.
What is the percent change in price? In quantity?
% ∆ Price = (P
2
– P
1
) / P
1
= (51)/1 = 500%
% ∆ Quantity = (Q
2
Q
1
)/Q
1
= (3 – 15)/ 15 =  80%

Using the Midpoint Formula, these numbers are irrelevant in
elasticity calculation.
4.
What is the elasticity that represents this change in price(use
the midpoint method to solve)?
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 Fall '06
 GUNTER
 Economics, Supply And Demand, Mildred, trashy novels

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