Elasticity of Demand Practice Assignment

1. Describe the relative price elasticity of demand by simply stating very elastic, somewhat elastic, very inelastic, somewhat inelastic? (2 marks)

a) clothing _________________________

b) shirts ___________________________

c) silk shirts ________________________

d) designer silk shirts _________________

2. Describe each of the following as either elastic or inelastic and explain (5 marks)

a) a Honda Civic automobile

Elastic or Inelastic? _________________ Explain______________________

_______________________________________________________________

b) an Air Canada ticket to Hawaii

Elastic or Inelastic? _________________ Explain______________________

_______________________________________________________________

c) bread

Elastic or Inelastic? _________________ Explain______________________

_______________________________________________________________

d) salt

Elastic or Inelastic? _________________ Explain______________________

_______________________________________________________________

e) electricity

Elastic or Inelastic? _________________ Explain______________________

______________________________________________________________

3. Read the following quotations. Describe the relative price elasticity of demand by simply stating very elastic, somewhat elastic, very inelastic, somewhat inelastic? Explain your answers. (2 marks each)

a) The freezing weather in Florida’s citrus belt will reduce this year’s previously predicted bumper crop.

How elastic? _________________ Explain___________________________

_______________________________________________________________

b) Transit ridership drops when fares increase, but revenue, nevertheless, rises.

How elastic? _________________ Explain___________________________

_______________________________________________________________

c) The 10% increase in postal rates led the Hydro company to e-mail bills.

How elastic? _________________ Explain___________________________

_______________________________________________________________

d) Without any morning coffee, I can’t start my day. Coffee is an essential.

How elastic? _________________ Explain___________________________

_______________________________________________________________