Question

Fill in the blanks to make the following statements correct. a. When an 8 percent change in the price of a good brings about a 12 percent change in its quantity demanded, we calculate the price elasticity of demand to be (Round your response to two decimal places.) We can say that demand for this good is b. When a 4 percent change in the price of a good brings about a 4 percent change in its quantity demanded, we calculate the price elasticity of demand to be (Round your response to two decimal places.) We can say that demand for this good is c. When a 10 percent change in the price of a good brings about a 4 percent change in its quantity demanded, we calculate the price elasticity of demand to be (Round your response to two decimal places.) We can say that demand for this good is

Answer 1

Price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price. Elasticity values above 1 indicate elastic demand, values below 1 indicate inelastic demand, and a value of 1 indicates unit elastic demand.

Step-by-step explanation:

To calculate the price elasticity of demand, we divide the percentage change in quantity demanded by the percentage change in price.

a. When an 8 percent change in the price of a good brings about a 12 percent change in its quantity demanded, we calculate the price elasticity of demand to be 1.50 (12/8 = 1.5). We can say that demand for this good is elastic.

b. When a 4 percent change in the price of a good brings about a 4 percent change in its quantity demanded, we calculate the price elasticity of demand to be 1.00 (4/4 = 1). We can say that demand for this good is unit elastic.

c. When a 10 percent change in the price of a good brings about a 4 percent change in its quantity demanded, we calculate the price elasticity of demand to be 0.40 (4/10 = 0.4). We can say that demand for this good is inelastic.