Question

The price of Shoes in Japan is Yen 1000. When exchange rate is Yen=$1/100, the Quantity of Imports of Shoes from Japan is 150000. Today, the exchange rate is Yen=$1/200, and the Quantity of Imports of Shoes from Japan has risen to 200000 What is the elasticity of imports? (Use the situation with Yen=$1/100 as the starting point)

Answer 1

The elasticity of imports is 0.67.

Step-by-step explanation:

% Change in demand for imports = (200,000/150,000) - 1

= 1.3333 - 1

= 33.3%

% Change in price of imports = [(1/200)/(1/100)] - 1

= (100/200) - 1

= 0.5 - 1

= -50%

Elasticity of imports

= % Change in demand for imports / % Change in price of imports (exchange rate)

= 33% / (- 50%)

= - 0.67

Absolute value = 0.67

Therefore, The elasticity of imports is 0.67.