Group Assignment 1 (GM): Elasticity (50 points) Purpose In this chapter, you learned about elasticity and how to calculate the measures of the various types of elasticity. The most important elasticity is the price elasticity of demand, which measures the responsiveness of quantity demanded to changes in price. Generally, demand is more elastic if there are many substitutes available, the good is more a luxury than a necessity, the good accounts for a large part of a consumer's budget, and the time period involved is longer. The purpose of this exercise is to illustrate how your group's collective consumption decisions are affected by the determinants of elasticity, to practice calculating and conrming these elasticities measures collectively as a group, and to understand how total spending on a good or service is affected by elasticity. Directions This exercise has two parts. In the first part, you and your group members will ll in a table and calculate and conrm with each other the price elasticity of demand for several goods. in the second part, you will evaluate your decisions and categorize the demand for each good as elastic or inelastic. Good Original Original Original New New New % A Q Price Part 2 Price Quantity Spending | Price Quantity Spending Elasticity Good Elastic / Inelastic Apples $2 $10 $3 2 $6 -60% -1.2 Apples Elastic (1bs.) Aspirit Inelastic Beer Aspirin $2 $2 $3 1 $3 0% Elastic (bottles) Print Books Elastic Bottled Water Elastic Beer (six $8 3 $24 $12 1 $12 -66.67% -1.33 Chicken Elastic packs) Coffee Fast Food Amazon $12 2 $24 $18 1 $18 -50% -1 Gasoline Print Books Laundry Detergent Bottled $5 4 $20 $7.50 2 $15.00 -50% -1 Microwave Popcorn Water Restaurant Meals (case) Soda Uber Rides Chicken $4 4 $16 $6 3 $12.00 -75% -1.5 (1bs.) 1. Explain how the factors that determine elasticity (i.e., availability of substitutes, necessity vs. luxury, and percentage of budget) influenced our response to the 50% increase in price for each of the goods and Coffee $8 3 $24 $12 2 $24.00 -66.67% -1.3 services (1bs.) 2. Explain the relationship between total spending on a good and a price increase when demand is: a. Elastic b. Inelastic Fast Food |$6 8 $48 $9 4 $36.00 -50% 1 (meals) Gasoline $3 24 $60 $4.50 24 $108.00 0% 0 (galls.) Laundry $5 2 $10 $7.50 2 $15.00 0% 0 Detergent (bottles) Microwav | $3 4 $12 $4.50 3 $13.50 -75% -1.5 e Popcorn (boxes Restauran $20 4 $80 $30 3 $90.00 -75% -1.5 t Meal Soda $5 5 $25 $7.50 3 $22.50 -60% -1.2 (cases) Uber $15 3 $45 $22.50 $22.50 -33% Rides 0.666666 7 $400 397 LO Accessibility: Good to go D Focus - + 60%W AutoSave (On GA1 Elasticity . Saved v Search Jordan Johnston X File Home Insert Draw Design Layout References Mailings Review View Help Table Design Layout Share Good Elastic / Inelastic Apples Elastic Aspirin Inelastic Beer Elastic Print Books Elastic Bottled Water Elastic Chicken Elastic Coffee Fast Food Gasoline Laundry Detergent Microwave Popcorn Restaurant Meals Soda Uber Rides 1. Explain how the factors that determine elasticity (i.e., availability of substitutes, necessity vs. luxury, and percentage of budget) influenced our response to the 50% increase in price for each of the goods and services. 2. Explain the relationship between total spending on a good and a price increase when demand is: a. Elastic b. Inelastic Page 2 of 2 255 words [ 2 Accessibility: Good to go Focus + 90%W AutoSave (On ) GA1 Elasticity . Saved v Search Jordan Johnston X File Home Insert Draw Design Layout References Mailings Review View Help Table Design Layout 15 Share Good Original Original Original New New New % AQ Price Price Quantity Spending Price Quantity Spending Elasticity Apples $2 $10 $3 2 $6 -60% 1.2 "lbs. ) Aspirin $2 $2 $3 1 $3 0% 0 bottles Beer (six $8 3 $24 $12 $12 -66.67% 1.33 packs Amazon $12 2 $24 $18 $18 -50% -1 Print Books Bottled $5 4 $20 $7.50 2 $15.00 -50% -1 Water (case) Chicken $4 4 $16 $6 3 $12.00 -75% -1.5 1bs. Coffee $8 3 $24 $12 2 $24.00 -66.67% -1.33 "lbs.) Fast Food $6 8 $48 $9 4 $36.00 -50% (meals Gasoline $3 24 $60 $4.50 24 $108.00 0% 0 (galls.) Laundry $5 2 $10 $7.50 2 $15.00 0% 0 Detergent (bottles) Microwave $3 4 $12 $4.50 3 $13.50 -75% -1.5 Popcorn boxes Restaurant $20 4 $80 $30 3 $90.00 -75% -1.5 Meals Soda $5 5 $25 $7.50 3 $22.50 -60% -1.2 (cases) Uber Rides |$15 3 $45 $22.50 $22.50 -33% 0.6666667 $400 397.5 Page 1 of 2 255 words Accessibility: Good to go Focus + 75%