DUEDATE: NAME:

CHAPTER4:DEMANDANDELASTICITYWORKSHEET

DefinitionofElasticityofDemand:

Itisa measureofhowresponsivequantityistoapricechange.Thehigherthe measurethenthemoreresponsiveconsumerswillbeto achangeinprice. Thelowerthemeasurethenthe lessresponsiveconsumerswillbeto achangeinprice.

1. Theelasticityofdemand isLOWER(LESS RESPONSIVE) in the long run because consumers havemore time toadjust.

1. AnElasticityof1.0 of greater = demand(page110inbook)

1. AnElasticityofexactly1.0 = demand

1. AnElasticityofbetween 0 and1.0 = demand

1. Use the Elasticity formula to calculate values of Elasticity for all the situations below. Change negatives topositives.

STEP1: Theformulaused tocalculatethepercentagechangeinquantitydemanded is:

[QDemand(NEW)-QDemand(OLD)]/QDemand(OLD)

STEP2:Theformulausedto calculatethepercentagechangein priceis:

[Price(NEW)-Price(OLD)]/Price(OLD)STEP3:(STEP1)/ (STEP2)

Price	Quantity	STEP1 % change in quantitydemanded	STEP2 % change inprice	STEP3 PriceElasticityofDemand
Initial	New	Initial	New
25	30	100	40			1.
40	70	120	90			2.
200	220	80	64			3.
50	75	150	135			4.

In eachcaseidentifywhether you woulddescribeitaselastic/unitelastic/inelastic

1.

2.

3.

4.

1. WhathappenstotheElasticityofDemandiftherearemanysubstitutesforagood?Isitelasticor inelastic?Why?

1. Giventhedatabelow,calculatetheprice elasticityofdemandwhenthepricechangesfrom $9.00to$10.00.

ANSWER: CHANGEALLNEGATIVENUMBERSTOPOSITIVES

DataforGoodX
Price($)	QuantityDemanded
7.00	200
8.00	180
9.00	150
10.00	110
11.00	60

1. Is the demand for Good X Elasticor Inelasticbetween $9 and $10? Use the above demand schedule toanswer this.

1. Whatdoesitmeanforagoodtobeelastic?

1. Whattypeofdemandwouldtherebe fora goodthathadNOsubstitutes? CircleOne

Elastic Inelastic

1. Whichwaywouldthedemand curveof GoodXshift ifthepriceofGoodY(acomplementarygood)increased?CircleOne

Left Right

1. WhathappenstotheDemandCurveofaGoodXifthepriceofGoodY(asubstitutegood)increases?Explainwhythedemand curveforGood Xchanged?

Left Right

1. Kobe'sfavoritedrinkiscola. Hebuysa12pack fromhislocalsupermarketand hasnoticedthatthepriceoften varies. His monthly demand for cola is shown below: From the information provided in thedemandschedule, drawalabeled demandcurvebelow.

Usethegraphspacetodrawthecurve.Labelthedemandcurve D1.

Kobe'sWeeklyDemandforCola
Price($)	QuantityDemanded
5.00	2
4.50	3
4.00	4
3.50	5
2.50	6

1. Kobe's drinks cola drinks to give him energy - he loves Dr. Pepper, but sometimes Mr. Pibb (a substitutegood for Dr. Pepper) is on special sale. Given the lower price for Mr. Pibb, a new demand schedule hadto be created for Dr. Pepper. Use the graph space above you created in Question 13 to draw the newdemandcurve. Label thenewdemand curveD2.

DEMANDSCHEDULE

PRICE FORDR. PEPPER	OLDDEMAND	NEWDEMAND
$5.00	2	1
$4.50	3	2
$4.00	4	3
$3.50	5	4
$2.50	6	5

1. From the information shown on figure 1 below, construct a demand schedule showing Kobe's monthlydemandforDr. Pepper.

1. Which way would the demand curve for Good X (an inferior good) shift if your income increased? CircleOne

Left Right

1. Inthe followingscenariosdescribeifthereisashift toademandcurve forGood X(asuperior good)andstatewhich waythecurvewill shift(Left, Right, orStays theSame)

1. anincreaseinpriceforGoodX A.
2. afallincustomer'sincome B.
3. anincreaseinthepriceofasubstitutegood C.
4. adecreaseinthepriceof acomplementgood D.

1. Whydo suppliers wantto createmoreinelasticdemand relationships in theproducts that theysell?