Category Type Calories Price Typical Price per per spending elasticity serving 100 g per week of (3) (3) demand 1 Fruit and 660 0.38 2.00 1.128 vegetables 2 Fruit and 140 0.36 3.44 0.830 vegetables 15 Grain, 1,540 0.38 2.96 0.845 pasta, bread 17 Grain, 960 0.53 2.64 0.292 pasta, bread 28 Snacks, 433 1.13 4.88 0.270 candy 29 Snacks, 1,727 0.68 7.60 0.295 candy 30 Milk 2,052 0.09 2.32 1.793 31 Milk 874 0.15 1.44 1.972 Figure 7.19 Price elasticities of demand for different types of food. See the Calories per serving to compare high and low calorie groups of each food type. EXERCISE 7.6 ELASTICITY AND EXPENDITURE gure 7.19 shows the spending per week in each category of a US consumer whose total expenditure on food is $80, with typical spending patterns across food categories. Suppose that the price of category 30, highcalorie milk products, increased by 10%: 1. By what percentage would his demand for highcalorie milk products fall? . Calculate the quantity he consumes, in grams, before and after the price change. . Calculate his total expenditure on highcalorie milk products before and after the price change. You should find that expenditure falls. . Now choose a category for which the price elasticity is less than 1, and repeat the calculations. In this case you should find that expenditure rises. 2. Quantity Consumed Before and After Price Change: . Q Weekly spending 0 Price per 100g ' Q1 Q0 X (1 0009) Now, substitute the values from the table: ' Initial spending = $80 ' Price per 1009 (Category 30) = $2.32 Calculate Q0 and then find Q1. 3. Total Expenditure Before and After: ' Expenditureo : Q0 X P ' Expenditurel : Q1 X P Substitute the values: ' P = $2.32 Calculate both expenditures. 4. Choose a Category with Elasticity Less Than 1 (e.g., Category 29 - Snacks): ' Repeat the calculations for a category with elasticity less than 1 (elasticity for Category 29 is 0.68)