ECN 221 In class work  CH 4 “The Elasticity of Supply and Demand”.
This is not due for a grade.
PRICE ELASTICITY OF DEMAND
is the percentage change in the quantity of a good demanded for a one percent change
in the good's own price.
That is, price elasticity of demand tells us by how much quantity demanded of a particular good will
change for a given price change.
p
d
d
E =
%
Q
%P
∆
∆
a.
What is the sign of price elasticity of demand?
Why?
b.
Between 1994 and 1995 the price of all gasoline
went up by 1%, and the quantity of gasoline demanded fell by 0.5%.
What is the price elasticity of demand for gasoline?
Is this demand "elastic" or "inelastic"?
c.
Between 1994 and 1995 the price of 89 octane gasoline at the Texaco station on Forest Avenue in Richmond
went up by
1%, and the quantity demanded of that particular gasoline fell by 10%.
What is the price elasticity of demand for this type of
gasoline?
Is this demand "elastic" or "inelastic"?
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 Fall '07
 Wadman
 Microeconomics, Price Elasticity, Supply And Demand, Texaco station

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