Elasticity of Demand Vocab. & Worksheets
(The elasticity of demand describes how strongly consumers react to a change in price)
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What the difference between a necessity and a luxury? Elastic Inelastic Unit elastic Total Revenue -
The calculation of elasticity (3 steps)
1. Price: (Original price – New price)/(Original Price) X 100 = percentage change
2. Quantity: (Original quantity – New quantity)/(Original Quantity) X 100 = percentage change
3. Change in Q / Change in P = Elasticity
The price decreases from $4 to $3, a decrease of 25%: ($4 – $3/4) X 100 = 25
The quantity demanded increases from 10 to 20, an increase of 100%: (10 – 20/10) X 100 = 100
100% / 25% = 4.0
The calculation of total revenue
The price of the good X the quantity of goods sold = total revenue
1. When the price of a magazine decreases from $5 to $4, the quantity demanded increases from 35 to
50. What is the elasticity of demand? Is this elastic, inelastic, or unit elastic? What is the total revenue?
2. When the price of burritos increases from $3 to $4 each, the quantity demanded drops from 20 to 15.
What is the elasticity of demand? Is this elastic, inelastic, or unit elastic? What is the total revenue?
3. When the price of gasoline increases from $2.50 to $3, the quantity demanded decreases from 100 to
95. What is the elasticity of demand? Is this elastic, inelastic, or unit elastic? What is the total revenue?