ASSIGNMENT OF ELASTICITY OF DEMAND AND SUPPLY BY MD NAJMUL ALI

Q1. Yesterday, the price of envelopes was $3 a box, and Julie was willing to
buy 10 boxes. Today, the price has gone up to $3.75 a box, and Julie is now
willing to buy 8 boxes. What is Julie's Price Elasticity of Demand? (Use the
Arc Elasticity Formula). Is Julie's demand for envelopes elastic or inelastic?

Q2. Which of the following goods are likely to have Elastic Demand, and
which are likely to have Inelastic Demand? Explain briefly (think of the
Determinants of Price Elasticity of Demand).

Home heating oil (used in cold countries for central heating)

Pepsi
Chocolate
Water
Heart medication
Oriental rugs (decorative carpets)

Q3. Katherine advertises to sell cookies for $4 a dozen. She sells 50 dozen, and
decides that she can charge more. She raises the price to $6 a dozen and sells
40 dozen. What is the Price Elasticity of Demand for cookies? (Use the Arc
Elasticity Formula). Is it elastic or inelastic?

Q4. From each pair of goods, pick the good for which demand will more likely
be more Elastic: (Explain briefly - think of the Determinants of Price
Elasticity of Demand)
Coffee and water
Rice and beef
Silk and cotton
Coffee makers and espresso machines

Q5. How is it possible for the Price Elasticity of Demand to change over time
(in the long run)? Explain.
 ASSIGNMENT OF ELASTICITY OF DEMAND AND SUPPLY BY MD NAJMUL ALI

Q6. Is the Price Elasticity of Demand for cigarettes likely to be Elastic or

Inelastic? Explain.

Q7. The accompanying table gives part of the supply schedule for personal
computers:

Price of Computer (dollars) Quantity of Computers Supplied

1,100 12,000

900 8,000

Calculate the Price Elasticity of Supply when the price increases from $900 to
$1,100 using the Midpoint Formula.

Q8. The accompanying table shows the price and yearly quantity sold of
T-shirts in the town of Crystal Lake according to the average income:

Price of T- Price of T- Quantity of T-shirts

shirt shirt demanded when the
Quantity of T-shirts average income is
demanded when the $30,000
average income is
$20,000
 ASSIGNMENT OF ELASTICITY OF DEMAND AND SUPPLY BY MD NAJMUL ALI

$4 3,000 5,000

$5 2,400 4200

$6 1,600 3000

$7 800 1800

a) i) Using the Midpoint Formula, calculate the Price Elasticity of Demand

when the price of a T-shirt
rises from $5 to $6 and the average income is $20,000. ii) Also calculate it
when the average income is
$30,000.
b) i) Using the Midpoint Formula, calculate the Income Elasticity of Demand
when the price of a T-shirt
is $4 and the average income increases from $20,000 to $30,000. ii) Also
calculate it when the price is $7

Q9. The price of good X falls by 15 %. As a result, the demand for good Y
rises by 30 %.

a) What is the Cross-Elasticity of Demand for good Y with respect to good

X? Is it Elastic or Inelastic?

b) Are the two goods substitutes or complements? Explain briefly