Chap004.2 - Slide 10 Price Elasticity of Demand...

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2 Chapter 4: Elasticity Slide 7 Elastic and Inelastic Demand 3 Price elasticity of demand Inelastic Unit elastic Elastic 2 1 0 Chapter 4: Elasticity Slide 8 Price Elasticity of Demand ± What is the elasticity of demand for pizza? z Originally ² Price = $1/slice ² Quantity demanded = 400 slices/day z New ² Price = $0.97/slice ² Quantity demanded = 404 slices/day, then Inelastic : 3 1 Price in Change % Quantity in Change % = Chapter 4: Elasticity Slide 9 Price Elasticity of Demand ± What is the elasticity of season ski passes? z Originally ² Price = $400 ² Quantity demanded = 10,000 passes/year z New ² Price = $380 ² Quantity demanded = 12,000 passes/year, then Elastic : 5 20 Price in Change % Quantity in Change % = Chapter 4: Elasticity
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Unformatted text preview: Slide 10 Price Elasticity of Demand Determinants of Price Elasticity of Demand z Substitution Possibilities z Budget Share z Time Chapter 4: Elasticity Slide 11 Price Elasticity Estimates for Selected Products Good or service Price elasticity Green peas 2.80 Restaurant meals 1.63 Automobiles 1.35 Electricity 1.20 Beer 1.19 Movies 0.87 Air travel (foreign) 0.77 Shoes 0.70 Coffee 0.25 Theater, opera 0.18 Chapter 4: Elasticity Slide 12 Price Elasticity of Demand Why is the price elasticity of demand more than 14 times larger for green peas than for theater and opera performances?...
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