When the local grocery store puts cereal on sale, reducing its price from $4.40 per item to $3.40 per item, the quantity sold increases from 220 per week to 230 per week.
1. This illustrates the elasticity of
2. What formula is used to determine the percentage change in quantity demanded?
3. What is the percentage change in quantity demanded for the cereals described above?
4. What formula is used to determine the percentage change in price?
5. Calculate the percentage change in price for the cereal.
6. Finally, using the whole formula, calculate the value of the price elasticity of demand for cereal.
7. Explain what this result means in words.
Suppose that a store decreases the price of laundry detergent from $4.10 to $3.50. As a result, quantity demanded increases from 210 to 230.
8. Using the mid-point formula, calculate the percentage change in price.
9. Using the mid-point formula, calculate price elasticity of demand. Your answer should be expressed in absolute value terms.
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When the local grocery store puts cereal on sale, reducing its price from $4.40 per item to $3.40 pe...
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