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Elasticity Practice Questions

# Elasticity Practice Questions - Practice What You Know A...

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Practice What You Know! A store manager decides to lower the price of a featured sandwich from \$3.00 to \$2.00 and he finds that sales during the week increase from 240 to 480 units. Calculate the price elasticity of demand using Equation 4.2. Recall that, Plugging in the values from above yields, Therefore E d = -1.67 Whenever the price elasticity of demand is less than -1, demand is referred to as elastic because the percentage change in the quantity demanded is greater than the percentage change in price. In this case, consumers were flexible and bought significantly more sandwiches in response to the price drop. If the E d coefficient had been closer to zero (anywhere from 0 to -1) we would have said that demand was inelastic. Lastly, notice that the E d has a negative sign; this is consistent with the inverse relationship between price and the quantity demanded we expect from the law of demand. Practice What You Know! A local pharmacy store manager decides to raise the price of a 100 pill prescription of amoxicillin from \$8.00 to \$10.00. The pharmacy tracks the sales of amoxicillin over the

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Elasticity Practice Questions - Practice What You Know A...

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