Please Help Solve elasticity Problem

Question

a) Suppose the price of flour increases from $0.80 to $1.00 a pound and the quantity demanded

decreases from 100 pounds to 95 pounds. What is the price elasticity of demand for flour? Is the

demand for flour elastic or inelastic?

b) If the price of suntan lotion increases from $6 to $8 per bottle and quantity demanded

decreases from 900,000 bottles to 845,000 bottles, what is the price elasticity of demand for

suntan lotion?

c) When the price of a movie ticket falls from $14 to $10, the quantity of tickets demanded

increases from 500 to 700 a day. What is the price elasticity of demand for movie tickets?

Answer 1

a) %ch in p = 25% % ch in Q = - 5% E = -5/25 = -.2 inelastic

b) %ch in P = 1/3 %ch in Q =-55/900 E = (-55/900)/(1/3) = - 55/300 inelastic

c) %ch in q = 2/5 %ch in p =-2/7 E = -7/5 elastic