Microeconomics Unit 2 Individual Project

Microeconomics Unit 2 Individual Project - unitary price...

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Microeconomics Unit 2 Individual Project 1 Microeconomics Unit 2 Individual Project Warren Synecky ECON220-1002B-13 May 5th, 2010
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Microeconomics Unit 2 Individual Project 2 When the price of a gallon of paint rose from $3.00 to $3.50 there was a 17% change in price. This caused a 43 percent decrease in demand that saw the sales of paint drop from 35 gallons to 20 gallons. This computes to a price elasticity of demand figure of 2.53. 43 percent change in demand / 17 percent increase in price = 2.53 price elasticity. Mankiw (2008, p.90) stated “Demand for a good is stated to be elastic if the quantity demanded responds substantially to changes in the price. Demand is said to be inelastic if the quantity demanded responds only slightly to the change in price”. According to Das (2005) “For some commodities price increase will bring about proportionate change in quantity demanded. For example, a 5% rise in price will bring a 5% decrease in quantity demanded. This is a case of
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Unformatted text preview: unitary price elasticity . That would make the demand for paint in this example elastic for the change in demand changed substantially to the change in price. Now the difference in elastic and inelastic is the difference in the amount demanded being substantial or not. Substantial is very subjective. What I find to be a substantial amount my neighbor may not find to be a considerable amount at all. It is all relative depending on circumstances. However I feel a 43% decrease in demand would be considered substantial by most peoples calculations and this is why I decided this example is a good example of demand elasticity. Microeconomics Unit 2 Individual Project 3 References Das, S. (2005). The concept of elasticity in economics. Retrieved from http://www.nvcc.edu/home/sdas/elasticity/meaning.htm Mankiw, N. (2008). Principals of Economics (5 th ed.). Mason, OH: South-Western Cengage Learning...
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This note was uploaded on 04/02/2011 for the course ECON 220 taught by Professor Theresiaa.wansi during the Fall '10 term at American InterContinental University.

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Microeconomics Unit 2 Individual Project - unitary price...

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