Price Elasticity in Real Life Situations
understanding elasticity in application to real
life situations, instead of just theoretical.
1) If own price elasticity for demand is -0.25, what
percentage would you change the price of a good to change consumption of this
good by 10%? Would this change in price be an increase or decrease? Is this
demand elastic, inelastic or unit elastic and why? Would the company who
produces the good total revenue increase or decrease and why?
2) Which of these would have more elastic demand and why?
a) A good in an intensely competitive market vs. the only
firm in the market
b) Gasoline when your tank is empty vs. gas when your tank
is full
c) Salt vs. rent
d) Bottled spring water vs. water from the faucet.
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