Try Another Version of These Questions

Question 1

When the local grocery store puts cereal on sale, reducing its price from $4.00 per item to $3.70 per item, the quantity sold increases from 210 per week to 240 per week. This response illustrates which of the following concepts?

Hint

Box 1: Select the best answer

price elasticity of demand

Question 2

What does this concept represent?

Hint

Box 1: Select the best answer

the percentage change in quantity demanded divided by the percentage change in price

Question 3

Let's look at the first part of the formula. How do we find the percentage change in quantity using the midpoint formula?

Hint

Box 1: Select the best answer

the change in quantity divided by the average quantity, multiplied by 100

Question 4

How do we express the percentage change in quantity using the variables Q

_{1}(original quantity) and Q_{2}(new quantity)?
Hint

Box 1: Select the best answer

`\frac{Q_{2}-Q_{1}}{(Q_{2}+Q_{1})\div 2}\times 100`

Question 5

Now calculate the percentage change in quantity demanded by plugging in the numbers for Q

percentage change in quantity demanded =

_{1}and Q_{2}.percentage change in quantity demanded =

Hint

Box 1: Enter your answer as an integer or decimal number. Examples: 3, -4, 5.5172

Enter DNE for Does Not Exist, oo for Infinity

13.333333333333

Question 6

Now let's look at the second part of the formula. How do we find the percentage change in price using the midpoint formula?

Hint

Box 1: Select the best answer

the change in price divided by the average price, multiplied by 100

Question 7

How do we express this using the variables P

_{1}(original price) and P_{2}(new price)?
Hint

Box 1: Select the best answer

`\frac{P_{2}-P_{1}}{(P_{2}+P_{1})\div 2}\times 100`

Question 8

Now plug in the numbers for P1 and P2 to calculate the percentage change in price.

Box 1: Enter your answer as an integer or decimal number. Examples: 3, -4, 5.5172

Enter DNE for Does Not Exist, oo for Infinity

-7.7922077922078

Question 9

Finally, using the whole formula, calculate the value of the price elasticity of demand for cereal.

price elasticity of demand =

price elasticity of demand =

Hint

Box 1: Enter your answer as an integer or decimal number. Examples: 3, -4, 5.5172

Enter DNE for Does Not Exist, oo for Infinity

-1.7111111111111

Question 10

Explain what this result means in words. Then click 'Submit' to compare your answer to ours.

Hint

Box 1: Enter your answer as text. This question is not automatically graded.

When the price of cereal falls from $4.00 to $3.70, sales increase from 210 per week to 240 per week. This means that, along the demand curve between $3.70 and 4, if the price changes by 1%, the quantity demanded will change by -1.71%.