Name Janille Ann A.

Valdez Course & Year BSA 1-1

Lecture Time__________________ Date Performed______________

Activity No. 4
Elasticities

1. Compute for the price elasticity of demand using the elasticity formula. Supplement your answer with the
Total Revenue Test.
QD Price QS
80 4.80 73
75 5.00 75
70 5.20 77
65 5.40 79
60 5.60 81

Elasticity Formula (Ed)

Ed = % change in Qd .
% change in Price
where; Change in Qd = Qd1 - Qd2
(Qd1 + Qd2)/2
and Change in Price = P1 - P2 .
(P1 + P2)/2
1. Change in Qd Change in Price 2. Change in Qd Change in Price
= 80 - 75 = 4.80 - 5.00 . = 75 - 70 = 5.00 - 5.20 .
(80 + 75)/2 (4.80 + 5.00)/2 (75 + 70)/2 (5.00 + 5.20)/2
= 5/77.5 = -0.2/4.9 = 5/72.5 = -0.2/5.1
= 0.06 = -0.04 = 0.07 = -0.04

ED = 0.06/-0.04 ED = 0.07/-0.04
= -1.75 = -1.75

3. Change in Qd Change in Price 4. Change in Qd Change in Price

= 70 - 65 = 5.20 - 5.40 . = 65 - 60 = 5.40 - 5.60 .
(70 + 65)/2 (5.20 + 5.40)/2 (65 + 60)/2 (5.40 + 5.60)/2
= 5/67.5 = -0.2/5.3 = 5/62.5 = -0.2/5.5
= 0.07 = -0.04 = 0.06 = -0.04

ED = 0.06/-0.04 ED = 0.08/-0.04
= -1.75 = -2

TR = Quantity Demand x Price

1. TR = 80 x 4.80 2. TR = 75 x 5.00
= 384 = 375
3. TR = 70 x 5.20 4. TR = 65 x 5.40
= 364 = 351
 Total Revenue Test

QD P TRT

80 4.80 384

75 5.00 375

70 5.20 364

65 5.40 351

60 5.60 336

2. The following hypothetical table is John’s demand for pandesal from Dec 2016 to January 2017 given his
monthly income.

Price per Quantity Income

pc (P/mo)

Dec 2.00 100 5,000

2016
Jan 2.00 120 4,000
2017

a. What happened to John’s income after December?

● After December, John's income decreases.

b. What happened to the quantity of pandesal bought by John?

● Despite his lower salary, John bought 100 pandesal in December 2016 and 120 in January
2017, indicating that his purchasing power has increased. This happened because breed is a
lower-quality product.

c. What economic concept is being shown by the relationship between John’s income and his
demand for pandesal?
● Income elasticity of demand is the economic relationship between John's income and his
desire for pandesal.
3. If goods R and K have a cross elasticity of -3 and goods R and S have a cross elasticity of 5, then, what
relationship exists between goods R and K? between R and S?
● R and K are complements, R and S are substitutes.

4. Number the 5. Number the

following demand following supply curves
curves from highest to from lowest to highest
lowest elasticity. elasticity.

5. Compute for the Price Elasticity of corn, beef and silk using the Elasticity formula. Supplement your answer
with the Total Revenue Test (P x Q) and interpret values obtained.

Elasticity Formula:

% change∈Qd
Ed =
% change∈Price

Corn Beef Silk

Price Qd Price Qd Price Qd
4 80 240 10 100 20
5 78 300 8 110 14