Final answer:
The elasticity of demand measures how much the quantity demanded of a product responds to a change in price. To calculate it, we require data on quantities demanded at different prices, then use the formula: Price Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Price). An example calculation provides an understanding of whether demand for walnuts is elastic, inelastic, or unit elastic.
Step-by-step explanation:
Calculating Elasticity of Demand for Walnuts
The elasticity of demand for a product is a measure of how sensitive the quantity demanded is to a change in price. To calculate the elasticity of demand for walnuts, we would typically need the specific quantities demanded at different prices, similar to the example provided for calculating price elasticity with apples and oranges. However, as no specific data for walnuts is provided, we will use a hypothetical scenario to elucidate the concept.
Suppose, initially, 1,000 kilograms of walnuts are demanded at a price of $10 per kilogram. If the price drops to $9 and the quantity demanded increases to 1,100 kilograms, we can calculate the price elasticity of demand using the following formula:
Price Elasticity of Demand (PED) = (% Change in Quantity Demanded) / (% Change in Price)
To find the percentage change in quantity demanded and price, we use:
- % Change in Quantity Demanded = [(1,100 - 1,000) / ((1,100 + 1,000) / 2)] x 100
- % Change in Price = [(9 - 10) / ((9 + 10) / 2)] x 100
After calculating the percentage changes, we would insert the values into the PED formula to get the elasticity.
For example, if the calculation results in an elasticity greater than 1, we say that demand for walnuts is elastic; if it is less than 1, demand is inelastic; and if it is exactly 1, demand is unit elastic.