Reading 13: Elasticity - LOS a, (Part 1): ～ Q6-10

答案和详解如下：

6.If the price elasticity of demand is -1.5 and you increase the price of the product 2 percent, the quantity demanded will (closest to):

A)   decrease 0.75%.

B)   decrease 1.5%.

C)   decrease 3%.

D)   increase 2%.

The correct answer was C)

If the price elasticity of demand is -1.5, and you increase the price of the product 2%, the quantity demanded will decrease approximately 3%. When the price elasticity is negative, it means that price and demand move in opposite directions. Given a price decrease, demand will increase and vice versa. The absolute value, 1.5, indicates that demand will move one-and-a-half times as much as price.

7.If the admission price for a rock concert is raised from $25 to $30 causing sales to drop from 60,000 to 40,000, the price elasticity of demand for tickets to the concert is:

A)   -2.20.

B)   -1.67.

C)   0.60.

D)   2.20.

The correct answer was A)    

Price elasticity of demand is calculated by dividing the percent change in quantity demanded by the percent change in price, using the average value of the variable in the computations. The percent change in quantity demanded is (40,000 – 60,000) / ((60,000 + 40,000) / 2) = -0.4. The percent change in price is (30 – 25) / ((30 + 25) / 2) = 0.1818. The price elasticity of demand is -0.40 / 0.1818 = -2.2.

8.George’s Appliance Center sells big screen televisions. On a representative model, when the price was reduced from $2,450 to $2,275, monthly demand increased from 175 to 211 units. What is the price elasticity of demand?

A)   -2.14.

B)   -1.69.

C)   -3.21.

D)   -2.53.

The correct answer was D)    

Price elasticity of demand = % change in quantity demanded / % change in price

% change in quantity = (211 - 175) / [(211 + 175)/2] = .187

% change in price = (2275 - 2450) / [(2275 + 2450)/2] = -.074

Price elasticity of demand = .187 / -.074 = -2.53

9.Price elasticity of demand is most accurately defined as the change in:

A)   market price in response to a change in the quantity demanded.

B)   quantity demanded in response to a change in income.

C)   quantity demanded in response to a change in the quantity supplied

D)   quantity demanded in response to a change in market price.

The correct answer was D)

10.Suppose the price of computers increases from $1,000 to $1,200. Assuming the original quantity demanded for computers was 50 million units, and the new quantity demanded is 45 million computers, what is the price elasticity of demand, and is the demand for computers elastic or inelastic?

A)   0.58, inelastic.

B)   -0.58, inelastic.

C)   1.73, elastic.

D)   -1.73, elastic.

The correct answer was B)

Price elasticity of demand is calculated by dividing the percent change in quantity demanded by the percent change in price, using the average value of the variable in the computations. The percent change in quantity demanded is (45 - 50) / [(50 + 45) / 2] = -5 / 47.5 = -0.105 or -10.5%. The percent change in price is = (1,200 - 1,000) / [(1,000 + 1,200) / 2] = 200 / 1,100 = 0.1818 or 18.2% . The price elasticity of demand is -10.5 / 18.2 = -0.58.