summarize the article and Solve the problem at the end of the article.

ELASTICITY 0F DEMAND The sensitivity of demand to changes in price varies with the product. For example, a change in the price oflight bulbs may not affect the demand for light bulbs much, because people need light bulbs no matter what their price. However, a change in the price of a particular make of car may have a signicant effect on the demand for that car, because people can switch to another make. We want to nd a way to measure this sensitivity of demand to price changes. Our measure should work for products as diverse as light bulbs and cars The prices of these two items are so different that it makes little sense to talk about absolute changes in price: Changing the price of light bulbs by $1 is a substantial change, whereas changing the price ofa car by $1 is not. Instead, we use the percent change in price. How, for example, does a 1% increase in price affect the demand for the product? Let Ap denote the change in the pricep ofa product and Aq denote the corresponding change in quantity q demanded. The percent change in price is Zip/p and the percent change in quantity demanded is Aq/q. We assume that Lip and Ag have opposite signs (because increasing the price usually decreases the quantity demanded). Then the effect of a price change on demand is measured by the absolute value of the ratio. Percent change in demand Percent change in price Alt i_ _|P_P.P_ RAP LP q 1139'qu :9 For small changes in p, we approximate by the derivative dq up dp We dene: The elasticity of demand for a product, E, is given approximately by Aq/q Ap/p p_d_q ridp E z or exactly by E: Increasing the price of an item by 1% causes a drop of approximately E% in the quantity of goods demanded. 0 If E> 1, Then a 1% increase in price causes the demand to drop more than 1%, and the demand is elastic - IfO S E