1. There are 3 parts to this question please answer fully For each of the follow

Question

1. There are 3 parts to this question please answer fully

For each of the following cases, calculate the arc price elasticity of demand, and state whether demand is elastic, inelastic, or unit elastic.

a. When the price of milk increases from $2.25 to $2.50 per gallon, the quantity demanded falls from 100 gallons to 90 gallons.

b. When the price of paperback books falls from $7.00 to $6.50, the quantity demanded rises from 100 to 150.

c. When the rent on apartments rises from $500 to $550, the quantity demanded decreases from 1,000 to 950.

Explanation / Answer

a.) (2.25-2.50)/(100-90) = -0.025

Since this number is less than one in absolute value, demand is inelastic

b.) (7-6.50)/(100-150) = -0.01

Since this number is less than one in absolute value, demand is inelastic

c.) (500-550)/(1000-950) = -1

Since this number is equal to one in absolute value, demand is unit elastic

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