Elasticity QUestions.docx - 1 Qiqi a highly motivated entrepreneur plans on applying for a business loan from Bank of America She finds out that the

Elasticity QUestions.docx - 1 Qiqi a highly motivated...

This preview shows page 1 - 3 out of 5 pages.

1. Qiqi, a highly motivated entrepreneur plans on applying for a business loan from Bank of America. She finds out that the percent change in price of business loans increased to 5% last month. This resulted in a 50% percent change in quantity demanded. What is the business loan’s price elasticity? Solution : Price Elasticity = % Change in Quantity Demanded / % Change in Price Since we know that price changed by 5% and quantity changed by 50%, substituting these values, we get: Price Elasticity = 50%/5% = 50/5 = 10 2. Angeline, a bright college student finds out that the iPhone 10 was just launched this past week in Cupertino, CA. She along with the thousands of consumers plans on purchasing the iPhone 10 from Best Buy due to a price decrease from $899.99 to $649.99. Apple expects to see the quantity demanded for iPhone 10 to rise from 2 million to 3 million by the end of the year. What is the iPhone 10’s elasticity of demand? Solution: Initial Price(P 0 ) = 899.99 New Price (P 1 ) = 649.99 Initial Quantity(Q 0 ) = 2 million New Quantity (Q 1 ) = 3 million Elasticity of Demand = % Change in Quantity / % Change in Price = (P 0 /Q 0 )*((Q 1 -Q 0 )/(P 1 – P 0 )) = (899.99/2)*((3-2)/( 649.99 - 899.99)) = -1.80 Thus, Iphone elasticity of demand is -1.80
Image of page 1

Subscribe to view the full document.

3. Kenny is a terrific athlete as he is the captain of his basketball team.
Image of page 2
Image of page 3
  • Spring '14

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes