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Unformatted text preview: decrease in quantity (as with most demand curves), the elasticity will be positive; remember to drop any minus signs when finding your final value for elasticity. Let's apply this and solve for elasticity in the market for ping pong balls. When ping pong balls cost $1 each, Alice is willing to buy 10 balls, and Joe is willing to sell 10 balls. When they cost $1.50 each, Alice is willing to buy 6 balls, and Joe is willing to sell 20. First, let's solve for Alice's price elasticity of demand: % Change in Quantity = (6-10)/10 = -0.4 = -40% % Change in Price = (1.50-1)/1 = 0.5 = 50% (-40%)/(50%) = -0.8 Take the absolute value to find elasticity. Elasticity of Demand = 0.8 Now, we use the same process to find Joe's price elasticity of supply: % Change in Quantity = (20-10)/10 = 1 = 100% % Change in Price = (1.50-1)/1 = 0.5 = 50% Elasticity of Supply = (100%)/(50%) = 2...
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- Fall '08