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All the Wrong Moves

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Assignment on Elasticity of Demand.

1. Suppose the price of a particular good increases from $95 to $105. As a consequence, you decrease your purchases of the good from 21 units to 19 units.

a. What is the price elasticity of demand for this good?

b. Is demand for this good elastic, inelastic, or unit elastic? ___________________________

c. Interpretation of the elasticity: A one percent increase in the price of the good would be expected to result in a __________ percent decrease in the quantity demanded of the good.

d. What is the total expenditure on this good before the price change and after the price change?

e. Did total expenditure on the good increase, decrease, or remain the same? _______________

2. Suppose the price of particular good increases from $95 to $105 as a result, your purchases of the good decrease from 41 units to 39 units.

a. What is the price elasticity of demand for this good?

b. Is demand for this good elastic, inelastic, or unit elastic? ___________________________

c. A one percent increase in the price of the good would be expected to result in a __________ percent decrease in the quantity demanded of the good.

d. What is the total expenditure on this good before the price change and after the price change?

e. Did total expenditure on the good increase, decrease, or remain the same? _______________

3. Suppose the price of particular good increases from $95 to $105. You then decrease your purchases of the good from 18 to 14.

a. What is the price elasticity of demand for this good?

b. Is demand for this good elastic, inelastic, or unit elastic? ___________________________

c. A one percent increase in the price of the good would be expected to result in a __________ percent decrease in the quantity demanded of the good.

d. What is the total expenditure on this good

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