The demand for a product is usually very sensitive to economic variables, such as the prices and… 1 answer below »
The demand for a product is usually very sensitive to economic variables, such as the prices and consumer income. This responsiveness of demand iselasticity. Compute elasticity inthe below scenarios:
a. Yesterday, the price of envelopes was $3 a box, and Jacky was willing to buy 10 boxes. Today, the price has gone up to $3.75 a box, and Jacky is now willing to buy 8 boxes. Is Jacky’s demand for envelopes elastic or inelastic? What is Jacky’s elasticity of demand?
b. Katy advertises to sell cookies for $4 a dozen. She sells 50 dozen and decides that she can charge more. She raises the price to $6 a dozen and sells 40 dozen. What is the elasticity of demand? Assuming that the elasticity of demand is constant, how many would she sell if the price were $10 a box?