Unit 4—Elasticity

Economists prefer to measure the change in one variable caused by a change in another variable using a unitless measure called the elasticity.

Jeff spends a relatively small fraction of his income on coffee. He also doesn’t like other caffeinated drinks such as Coke. Therefore,

            a.  Jeff’s demand for coffee would tend to be elastic.

            b.  Jeff’s demand for coffee would tend to respond strongly to changes in price of Coke.

            c.  a 10% increase in the price of coffee is likely to result in a 20% decrease in the quantity of                                       coffee demanded by Jeff.

            d.  Jeff’s demand for coffee would tend to be inelastic.

 

The graph shows Jeff’s demand for coffee.

 

1.      What is the percentage change in price when going from point A to point B using the midpoint formula?

 

 

 

2.      What is the percentage change in quantity when going from point A to point B using the midpoint formula?

 

 

 

 

3.      What is the price elasticity of demand when going from point A to point B using the midpoint formula? (Hint: look at your answers to 1 and 2)

 

 

4.      An increase in the price from $2 to $4 would _______________ total revenue because demand is __________.

a.      increase … elastic

b.      decrease … elastic

c.      increase … inelastic

d.      decrease … inelastic

 

 

PLEASE HELP ME WITH THESE QUESTIONS!!! I NEED HELP!!

attached is the document that has the graph!!!!

• 1496647254-Unit 4 In-Class Exercise.docx

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