Answer to Question #81445 in Microeconomics for jay

Question

Using the elasticity formulas.] Answer the following questions: a) The initial price for an item is $6.00, and the quantity demanded is 550 units. When the price is raised to $6.50, the quantity demanded falls to 520 units. What is the point elasticity of demand? How would we categorize this elasticity (elastic, inelastic, unit elastic,...)? b) A product’s point price elasticity has been estimated at -1.85 (different from part a). At the initial price of $30, the quantity demanded was 30 units. If the firm cuts the price to $27.25, how much will quantity demanded and sold increase? c) A firm’s demand curve is estimated to be Q = 450 - 2.5P, where Q is quantity and P is the price of the good. At P = $40, what is the point elasticity of demand?