Elasticity: End of Chapter Problem 5. Let's work out a few examples to get a sense of what elasticity of demand means in practice. a. If the elasticity of demand for college textbooks is -0.1, and the price of textbooks increases by 20%, how much will the quantity demanded change, and in what direction? Quantity demanded changes by In which direction? O number of textbooks up down b. In your answer to part a, was your answer in percentages or in total number of textbooks? O percentages

Elasticity: End of Chapter Problem 5. Let's work out a few examples to get a sense of what elasticity of demand means in practice. a. If the elasticity of demand for college textbooks is -0.1, and the price of textbooks increases by 20%, how much will the quantity demanded change, and in what direction? Quantity demanded changes by In which direction? O number of textbooks up down b. In your answer to part a, was your answer in percentages or in total number of textbooks? O percentages

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter6: Elasticities

Section: Chapter Questions

Problem 8P: If the elasticity of demand for hamburgers equals 21.5 and the quantity demanded equals 40,000,...

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If the elasticity of demand for hamburgers equals 21.5 and the quantity demanded equals 40,000, predict what will happen to the quantity demanded of hamburgers when the price increases by 10 percent. If the price falls by 5 percent, what will happen?
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The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?
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