Quantitative Literacy Assignment – Elasticity

Posted on 2014-04-03 09:29:00 in Economics by 'O' BANNER

The table below shows a hypothetical demand schedule for quarts of milk.



Price ($) Quantity Demanded (Quarts of Milk)



$1.00 1



.90 2



.80 3



.70 4



.60 5



.50 6



.40 7



.30 8



.20 9



.10 10



Part I. Using a Midpoint formula, compute the coefficient of elasticity of demand for the



following price changes from last year to this year. Show your computations.



a) Price Q.D.



Last Year $ .80 3



This Year 1.00 1



b) Last Year .10 10



This Year .30 8



c) Last Year .50 6



This Year .60 5 .

Part II. Graph the demand schedule for milk above on the grid below, plotting the quantity



demanded at the various prices. (Use titles for the graph, axes, and curve).

Part III. Answer the following question in a few well written sentences.



From your answers to Part I, what is the elasticity of demand for milk - is it elastic, inelastic, or



unitary, and what does this depend upon? Indicate the responsiveness of consumers to the price



changes in the three price levels in a), b) and c) in Part I.

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