Solved Microeconomic Exercises: Elasticity of demand and supply

Topic 4. ELASTICITY OF THE DEMAND AND SUPPLY
I. Self-check Questions:

Task A: From the data in Table 5.5 about demand for smart phones, calculate the price elasticity of
demand from: point B to point C, point D to point E, and point G to point H. Classify the elasticity
at each point as elastic, inelastic, or unit elastic.




| || || |
A1 point B to point C:

∆ Qd 2600−2800
Q 1 +Q2 2600+2800 −200
|E PD|= ∆2P = 80−70 2
=
2700
10
=
15000 15
= =¿ inelastic
27000 27
P1 + P2 80+70 75
2 2




| || ||
A2 point D to point E:

∆ Qd 2200−2400



|
Q1 +Q 2 2200+2400 −200
|E PD|= ∆2P = 100−90 2
=
2300
10
=
19000 19
= =¿ inelastic
23000 23
P1 + P2 100+90 95
2 2




| || || |
∆ Qd 1600−1800
Q 1 +Q 2 1600+1800 −200
2 2 1700 25000 25
A3 point G to point H: | E D|=
P
= = = = =¿ elastic
∆P 130−120 10 17000 17
P 1 + P2 130+120 125
2 2

, Task B: From the data in Table 5.6 about supply of alarm
clocks, calculate the price elasticity of supply from: point J
to point K, point L to point M, and point N to point P.
Classify the elasticity at each point as elastic, inelastic, or
unit elastic.

B1.1 point J to point K:




|| | | | |
∆ Qs 50−70
Q1 +Q2 50+ 70 −20
|E PS|= ∆2P = 9−8 2
=
60
1
=
170 17
60
= =¿ elastic
6
P1 + P 2 9+ 8 8.5
2 2




| || || |
∆ Qs 80−88
Q1 +Q2 88+80 −8
2 2 84 84
B1.2 point L to point M: | E S|=
P
= = = =1=¿ unit elastic
∆P 11−10 1 84
P1 + P2 11+10 10.5
2 2




| || || |
∆ Qs 95−100
Q1 +Q2 95+100 −5
2 2 97.5 62.5 25
B1.3 point N to point P: | E S|=
P
= = = = =¿ inelastic
∆P 13−12 1 97.5 39
P1 + P2 13+12 12.5
2 2

B2 Why is the demand curve with constant unitary elasticity concave?