Question

Suppose Josh’s elasticity of demand for hamburgers is -1.25. If the price increased 25%, how would Josh's hamburger purchases change?

increase hamburger purchases by 31.25 percent

decrease hamburger purchases by 31.25 percent.

increase hamburger purchases by 20.1 percent

decrease hamburger purchases by 20.1 percent

increase hamburger purchases by 1.25%

decrease hamburger purchases by 1.25%

Question 3

Suppose the price of steak dropped from $10.00/lb to $9.00/lb. If steak is inelastic over this range, we would expect

Total revenue of steak to fall

Total revenue of steak to increase

Total revenue for steak to increase or decrease (can’t tell with the available information).

Question 4

If the elasticity of demand for carpet is -1.5, then a 5% price increase will

Decrease quantity demanded by 2.5%

Decrease quantity demanded by 7.5%

Decrease quantity demanded by 15%

Increase quantity demanded by 2.5%

Increase quantity demanded by 7.5%

Increase quantity demanded by 15%

Answer 1

Answer
option 2

Price elasticity of demand =%change in quantity/%change in price
-1.25=%change in quantity/25
%change in quantity=(-1.25)*25
=-31.25
the quantity will decrease by 31.25%, the negative sign shows a decrease.
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Q3
Answer
Option 1
Total revenue of steak to fall
The total revenue is maximum at unit elastic demand, and the elasticity and price have a positive relationship as the price increases the elasticity increases. The demand is inelastic means it's below unit elastic, and if the price decreases the revenue will decreases as the decreased elasticity will decrease more, it will become more inelastic. It is because an inelastic demand means the quantity changes less than the price in proportion, so the product of it decreases.
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Q4
Answer
Option 2
Price elasticity of demand =%change in quantity/%change in price
-1.5=%change in quantity/5
%change in quantity=(-1.5)*5
=-7.5
the quantity will decrease by 7.5%; the negative sign indicates a decrease.