Answer to Question #62012 in Microeconomics for Benjamin Logan

Question

1. Flowers are one of the most common gifts to give on Valentine's Day, a celebration that occurs every year on the 14th of February. A flower shop knows that in the past, because of the high demand for flowers on this day, it could sell 50 bouquets of flowers for $119.50 each. This year, on Valentine's Day, the flower shop decides to increase the price of the bouquets to $129.50 and sells 48 bouquets.

Which of the following statements are true (to four decimal places):

The point price elasticity of demand for the bouquets at a price of $119.50 is 0.4780.

The point price elasticity of demand for the bouquets at a price of $119.50 is 11.9500.

The point price elasticity of demand for the bouquets at a price of $119.50 is 0.0837.

A 1% decrease in the price of bouquets would lead to a 0.4780% increase in the quantity of bouquets demanded.