Elasticity of Demand

The formula for calculating elasticity of demand is:

• The % change in price over the % change in quantity demanded
• The % change in quantity demanded over the % change in price
• The change in price over the change in quantity demaned
• The change in quantity demanded over the change in price

The elasticity of demand for tissues is 0.66. This means the demand for tissues is

• elastic
• unit elastic
• inelastic
• really expensive

What does it mean?

Ed = 0

• Perfectly inelastic demand

• Inelastic demand

• Unitarily elastic demand

• Elastic demand

• Perfectly elastic demand

What does it mean?

Ed = 1

• Perfectly inelastic demand

• Inelastic demand

• Unitarily elastic demand

• Elastic demand

• Perfectly elastic demand

What does it mean?

Ed = ∞

• Perfectly inelastic demand

• Inelastic demand

• Unitarily elastic demand

• Elastic demand

• Perfectly elastic demand

What does it mean?

Ed > 1

• Perfectly inelastic demand

• Inelastic demand

• Unitarily elastic demand

• Elastic demand

• Perfectly elastic demand

What does it mean?

Ed < 1

• Perfectly inelastic demand

• Inelastic demand

• Unitarily elastic demand

• Elastic demand

• Perfectly elastic demand

Elasticity refers to

• how producers of goods and services react to price changes

• how consumers of goods and services react to price changes

• how far a supply of scarce goods can be stretched

• how often the price of a good or service changes when quantity demanded changes

Which of these demonstrates elastic demand?

• a sharp increase in the price of milk causes a large drop in the quantity demanded for milk

• the price of homes steadily increase but the quantity demanded for homes does not change

• car dealerships cut prices to clear out previous year models and consumers rush to dealerships to take advantage of the sales

• gas prices increase in the summer as more people want to go on road trips but the increases do not deter people from buying less gas

Which of these demonstrates inelastic demand? (multiple answers)

• a cold snap destroys an apple crop causing prices to jump, however, people still buy apples and quantity demanded does not change

• Super Bowl tickets hit record high prices but are still sold out in a matter of minutes and starting going for even higher prices on resale sites

• concert tickets are not selling well, so the venue drops prices by 80%; the tickets sell out shortly thereafter

• a restaurant starts charging a $10 delivery fee, delivery orders drop by 50% in the first month