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Elasticity of Demand Worksheet Guide

The document is a worksheet on price elasticity of demand. It provides information on calculating price elasticity using a formula that relates the percentage change in quantity demanded to the percentage change in price. It then asks the student to calculate price elasticity values for different scenarios and identify if the good is elastic, unitary elastic, or inelastic in each case. Additional questions ask the student to determine what factors influence a good's elasticity and whether changes in price would increase or decrease total revenue depending on if a good is elastic or inelastic.

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Abhishek
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112 views2 pages

Elasticity of Demand Worksheet Guide

The document is a worksheet on price elasticity of demand. It provides information on calculating price elasticity using a formula that relates the percentage change in quantity demanded to the percentage change in price. It then asks the student to calculate price elasticity values for different scenarios and identify if the good is elastic, unitary elastic, or inelastic in each case. Additional questions ask the student to determine what factors influence a good's elasticity and whether changes in price would increase or decrease total revenue depending on if a good is elastic or inelastic.

Uploaded by

Abhishek
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Name____________________

Worksheet on Elasticity

Q1 - E L A S T I C or INELASTIC?

Price Elasticity of Demand is a measure of how responsive demand is to a change in price. If a price
change leads to a considerably bigger change in quantity demanded, we would consider the good to be
responsive to a price change—hence elastic. If, however, a similar price change leads to a much
smaller change in demand, we would consider it inelastic.

To get a more precise measure of the responsiveness to a price change we can calculate a value for
price elasticity of demand. We use the formula:

percentage change in Q demand


PRICE ELASTICITY OF DEMAND =
percentage change in price
Original Number-New Number X 100
PERCENTAGE CHANGE=
Midpoint

Use the formula above to calculate values of Price Elasticity for all the situations below:

Price Quantity % change in quantity % change in Elasticity of


Initial New Initial New demanded price Demand

25 30 100 40     1. ___________
40 70 120 90     2. ___________
200 220 80 64     3. ___________
50 75 150 135     4. ___________

In each case identify whether you would describe it as elastic / unitary elastic / inelastic

1. _________________________ 2. _________________________
3. _________________________ 4. _________________________

Q2- What determines E L A S T I C I T Y?


As we have seen above it is important to a company to have an idea of the value of the elasticity of demand of its good or
service as it will affect what happens to their total revenue as price changes. What should the company aim to do with their
price in each of the circumstances below?

Elasticity Which change in price would increase total revenue??


(Increase or decrease?)
Elastic  
Inelastic  

If the company wants to estimate the value of the price elasticity of their product, then they need to
judge it against the following criteria:

 Number of ____________________:

 Strength of ___________________:

 Luxuries vs. ___________________:


 Percentage of ________________ spent on good:

Judge the products in the table below to decide whether you think they will be elastic or inelastic:

Product Elastic or inelastic? Why?


Salt    
Hawaiian Vacation    
Apple iPhone    
Cigarettes    
Tap Water    
Gasoline    
Dasani Water    

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