Answer the four questions:

Suppose: a. change in quantity demanded for chocolate is 0.6% b. change in prices for chocolate is 40%

1. Calculate elasticity of demand for chocolate using a and b above.

2. Explain what factors affect the elasticity of demand of chocolate.

3. Explain the coefficient: given a 10% increase in the price of chocolate, by what % do you expect the quantity demanded to drop?

4. What factors have led to the shift in demand for chocolate?