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July 22, 2014

July 22, 2014

Posted by **Randy** on Wednesday, November 19, 2008 at 10:26am.

Thank You

Suppose the price of apples rises from $3.50 a pound to $4.00 and your consumption of apples drops from 30 pounds of apples a month to 20 pounds of apples. Calculate your price elasticity of demand of apples. What can you say about your price elasticity of demand of apples? Is it Elastic, Inelastic, or Unitary Elastic? Be sure to show the work.

- Economics -
**drwls**, Wednesday, November 19, 2008 at 10:34amIf the percent drop in consumption exceeds the percent increase in price. the demand is elastic. That is the case in your example.

See

http://en.wikipedia.org/wiki/Price_elasticity_of_demand

- Economics -
**Randy**, Wednesday, November 19, 2008 at 10:37amCould you please show me the workout on this ? Thank You

- Economics -
- Economics -
**economyst**, Wednesday, November 19, 2008 at 10:58amPrice elasticity is the percentage change in price divided by the percentage change in quantity.

%change in P = 100*(.50/3.50) =14.29

%change in Q = 100*(-10/30) = -33.33

Elasticity therefore is -33.33/14.29 = -2.33

Since elasticity is > 1 (absolute value) it is elastic.

(Note: some economists prefer the mid-point method for calculating percentage change. here %change P is .5/3.75 and %change Q is -10/25).

- Economics -
**Randy**, Wednesday, November 19, 2008 at 11:39amThank You :)

- Economics -

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