{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

chapter4ans - Answer guide for ch 4 1 a The price...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Answer guide for ch 4. 1. a. The price elasticity of demand is 1.25. The price elasticity of demand equals the percentage change in the quantity demanded divided by the percentage change in the price. The price rises from $4 to $6 a box, a rise of $2 a box. The average price is $5 a box. So the percentage change in the price equals $2 divided by $5, which equals 40 percent. The quantity decreases from 1,000 to 600 boxes, a decrease of 400 boxes. The average quantity is 800 boxes. So the percentage change in quantity equals 400 divided by 800, which equals 50 percent. The price elasticity of demand for strawberries equals 50 divided by 40, which is 1.25. b. The price elasticity of demand exceeds 1, so the demand for strawberries is elastic. 2. a. The price elasticity of demand is 2. When the price of a DVD rental rises from $3 to $5, the quantity demanded of DVDs decreases from 75 to 25 a day. The price elasticity of demand equals the percentage change in the quantity demanded divided by the percentage change in the price. The price increases from $3 to $5, an increase of $2 a DVD. The average price is $4 a DVD. So the percentage change in the price equals $2 divided by $4, which equals 50 percent. The quantity decreases from 75 to 25 DVDs, a decrease of 50 DVDs. The average quantity is 50 DVDs. So the percentage change in quantity equals 50 divided by 50, which equals 100 percent. The price elasticity of demand for DVD rentals equals 100 divided by 50, which is 2. b. The price elasticity of demand equals 1 at $3 a DVD. The price elasticity of demand equals 1 at the price halfway between the origin and the price at which the demand curve hits the y-axis. That price is $3 a DVD. 3. The demand for dental services is unit elastic. The price elasticity of demand for dental services equals the percentage change in the quantity of dental services demanded divided by the percentage change in the price of dental services. The price elasticity of demand equals 10 divided by 10, which is 1. The demand is unit elastic.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

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