Suppose that the demand for artichokes (Qa) is given as Qa = 100 - 10P. What is

Question

Suppose that the demand for artichokes (Qa) is given as Qa = 100 - 10P. What is the price elasticity of demand if the price of artichokes is $8?  the answer is -4

Using the information in the previous question. Suppose that the price of artichokes is increased slightly from $8. The total expenditure by consumers on artichokes will ________ and the number of artichokes sold will ________. - dont need this only if needed for problem

Using the information At what price, if any, is the demand for artichokes completely elastic? *** need this answer

Explanation / Answer

Given that demand for artichokes is Qa = 100 - 10P. The price elasticity of demand when price = $8 and Qa = 20 units is ed = -10*8/20 = -4

Now the price of artichokes is increased slightly from $8. Since demand is elastic (due to |ed| > 1) we expect that the total expenditure by consumers will reduce. This happens because the % increase in price is less than % reduction in demand and this reduces expenditure. This means the number of artichokes sold will fall.

When demand for artichokes is completely elastic, it will be called perfectly elastic and will have an elasticity value of infinite. When Q = 0, P = 10. Hence at a price of very close to $10 but less than it, Quantity is very close to 0 but is positive, then the elasticity is ed = -10*10/0.000001 = infinite. (Here in quantity we take 0.000001 just to show that the quantity demanded is positive but is almost zero). The required price is therefore $10.

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