Elasticity Demand and Supply

# Elasticity Demand and Supply - 1 Determine the price...

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Elasticity: Demand and Supply 1. Determine the price elasticity of demand at each quantity demanded using the formula: Percentage change in quantity demanded = (Q2-Q1)/Q1 divided by percentage change in price = (P2-P1)/P1 Percentage change Qty Demanded Price Quantity Price Elasticity 100 \$5  80 \$10  -20%  =(80-100)/100 100%  =(10-5)/ 5 -0.20  =-20%/100% 60 \$15  -25% 50% -0.50 40 \$20  -33% 33% -1.0 20 \$25  -50% 25% -2.0 10 \$30  -50% 20% -2.50 b. Redo exercise 1a using price changes of \$10 rather than \$5 Percentage change Qty Demanded Price Quantity Price Elasticity 100 \$5  80 \$15  -20% 200% -0.10 60 \$25  -25% 67% -0.375 40 \$35  -33% 40% -0.833 20 \$45  -50% 29% -1.75 10 \$55  -50% 22% -2.25 c. Plot the price and quantity date given in the demand schedule. Indicate the price elasticity value at each quantity demanded. Explain why the elasticity value gets smaller as you move down the demand curve. \$0

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Elasticity Demand and Supply - 1 Determine the price...

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