ECON 200

10 Pointer: Elasticity
Name: …………………………

1. You are a supplier of peanuts. Your research department estimates that the price elasticity
of demand for peanuts is 2.5. By what percentage will quantity demanded rise if you
lower price from $4 to $2?

2. Suppose the price elasticity of demand for a good is 0.58. Explain its meaning.

3. Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent

increase in quantity demanded for organic produce.

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 4. (Figure: The Market for Chai Lattes) What is the price elasticity of supply between the
prices of $2 and $2.50 per cup, using the midpoint method?

5. What are the determinants of the price elasticity of demand?