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A4 - Elasticity - Calculations & Applications

Questions

Q-1: If a rightward shift of the supply curve leads to a 6 percent decrease in the price and a 5
percent increase in the quantity demanded, the price elasticity of demand is

5/6 = 0.833

Inelastic Demand

Q-2: A 10 percent increase in the quantity of spinach demanded results from a 20 percent decline
in its price. The price elasticity of demand for spinach is

10/20=0.5

Inelastic demand

Q-3: A 20 percent increase in the quantity of pizza demanded results from a 10 percent decline in
its price. The price elasticity of demand for pizza is

20/10=2

Elastic demand

Instructor: Asif Z. Warsi Page 1