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Elasticity Exercises (Answers Are Listed Below Question)
Elasticity Exercises (Answers Are Listed Below Question)
ELASTICITY EXERCISES
(answers are listed below question)
1. The following is a demand schedule for jogging shoes:
Price per Pair
$140
120
100
80
60
40
20
140
120
100
80
60
40
20
D1
6 10 14 18 22 26
b. Calculate the arc elasticity coefficient as price decreases from $120 to $100,
$80 to $60, and $60 to $40.
Ed = Q2-Q1/(Q2+Q1)/2
P2-P1/(P2+P1)/ 2
From $120 to $100: Ed = 2.77
From $80 to $60: Ed = .88
From $60 to $40: Ed = .50
f. What happens to total revenue for banana sellers when the price of
bananas increases? Explain your answer.
TR decreases because bananas are price elastic in this price change.
g. Give 2 factors that would cause bananas to have this elasticity of demand
calculated in part (a) above.
1) existence of other fruits that are good substitutes.
2) Banana is not a necessity.