Fill-in-the-Blank
1. Fill in the blanks to make the following statements correct.
a. When a 10 percent change in the price of a good brings
about a 20 percent change in its quantity demanded, we
calculate the price elasticity of demand to be. We can
say that demand for this good is.
b. 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. We can
say that demand for this good is.
c. When a 10 percent change in the price of a good brings
about a 10 percent change in its quantity demanded, we
calculate the price elasticity of demand to be. We can
say that demand for this good is.
2. Fill in the blanks to make the following statements correct.
a. When measuring elasticity of demand we calculate the
percentage change of both and. When calculating
the percentage change it is important to divide the
change by the value of the variable. By doing so we
avoid the problem of having a different measure
depending on our starting point.
b. Since quantity demanded and price are negatively related
to each other, the elasticity measure should be a