CHAPTER 4: DEMAND AND ELASTICITY WORKSHEET

Definition of Elasticity of Demand:

It is a measure of how responsive quantity is to a price change. The higher the measure then the more
responsive consumers will be to a change in price. The lower the measure then the less responsive consumers
will be to a change in price

1. The elasticity of demand is ___________ in the ___________ run because consumers have MORE time to
adjust.

2. An Elasticity of 1.0 of greater elastic

= a _________________ demand (page 110)
unitary
3. An Elasticity of exactly 1.0 = a _________________ demand

4. An Elasticity of between 0 and 1.0 Inelastic

= a _________________ demand

5. Use the Elasticity formula to calculate values of Price Elasticity for all the situations below:

The formula used to calculate the percentage change in quantity demanded is:
[QDemand(NEW) - QDemand(OLD)] / QDemand(OLD)

The formula used to calculate the percentage change in price is:

[Price(NEW) - Price(OLD)] / Price(OLD)

Price Quantity % change in quantity % change in Price Elasticity of

Initial New Initial New demanded price Demand

25 30 100 40
25-30/25x100% 3
1. ___________
100-40/100x100%= 60% = -20%
40 70 120 90 40-70/40x100% 25%/75%= 0,3
2. ___________
120-90/120x100%=25% = -75%
200 220 80 64 200-220/200 20%/10%= 2
3. ___________
80-64/80x100%= 20% x100%= -10%
10%/50%= 0,2
50 75 150 135
150-135/150x100%=10% 50-75/50x100% 4. ___________
= -50%
In each case identify whether you would describe it as elastic / unit elastic / inelastic
elastic
1. _________________________
inelastic
2. _________________________
elastic
3. _________________________
inelastic
4. _________________________

6. What happens to the Elasticity of Demand if there are many substitutes for a good? Is it elastic or inelastic?
Why?

Sharrock © 2009 Revised 1/09

7. Formula for the Elasticity of demand = ___________________ divided by ___________________ .

8. Given the data below, calculate the price elasticity of demand when the price changes from $9.00 to $10.00.
Copy the formulas on your paper and use them to answer the question.
**CHANGE ALL NEGATIVE NUMBERS TO POSITIVES.
Data for Good X
Price Quantity Demanded
$7 200
$8 180
$9 150
$10 110
$11 60

9. Is the demand for Good X elastic or inelastic between $9 and $10?

10. What does it mean for a good to be elastic?

11. Kobe’s favorite drink is cola. He buys 12 packs sized from his local supermarket and has noticed that the
price often varies. His monthly demand for cola is shown below:

Kobe’s weekly demand for cola

Price ($) Quantity demanded
5.00 2
4.50 3
4.00 4
3.50 5
2.50 6

a. From the information provided in the demand schedule, draw a labeled demand curve below. Use the graph
on the next page.

Sharrock © 2009 Revised 1/09

b. Explain how the demand curve illustrates the Law of Demand

12. Kobe’s drinks cola drinks to give him energy - he loves Dr. Pepper, but sometimes Mr. Pibb (a substitute
good for Dr. Pepper) is on special sale. Given the lower price for Mr. Pibb, a new demand schedule had
to be created for Dr. Pepper. Use the graph you created in question 11(a) to draw the new demand curve.

DEMAND SCHEDULE
PRICE FOR DR.
OLD DEMAND NEW DEMAND
PEPPER
$5.00 2 1
$4.50 3 2
$4.00 4 3
$3.50 5 4
$2.50 6 5

Use the graph below to answer question 13.

Sharrock © 2009 Revised 1/09

13. Which way would the demand curve for Good X (an inferior good) shift if your income increased? Show
your answer on the above graph.

14. What type of demand (elastic or inelastic) would there be for a good that had NO substitutes?

15. Which way would the demand curve of Good X shift if a complement good’s price increased?

16. From the information shown on figure 1 below, construct a demand schedule showing Kobe's monthly
demand for Dr. Pepper.

Sharrock © 2009 Revised 1/09

17. What happens to the Demand Curve of a Good X if the price of Good Y, a substitute good, increases?
Explain why the demand for Good X changed?

18. In the following scenarios describe if there is a shift to a demand curve for Good X and if there is tell which
way the curve will shift:
a) an increase in price for Good X A. ___________________________________
b) a fall in customer’s income B. ___________________________________
c) an increase in the price of a substitute good C. ___________________________________
d) a decrease in the price of a complement good D. ___________________________________

Sharrock © 2009 Revised 1/09