Mr. Maurer
AP Economics
Homework: Friday 10/2/15
A. Read Chapter 6, p. 135-143 and answer these questions. Write your answers on your own
paper.
1. What is meant by price elasticity?
2. Define the terms elastic and inelastic.
3. How do you calculate price elasticity of demand?
4. Why is elasticity calculated in percentages?
5. What is a price elasticity coefficient?
6. What range or price elasticity coefficients correspond to the following:
a. elastic demand
b. inelastic demand
c. unit elasticity
7. What does it mean to say that a product is perfectly inelastic? Provide examples.
8. What does it mean to say that a product is perfectly elastic?
9. Why is it important to use the midpoint formula when calculating price elasticity?
10. How does elasticity change over the length of the demand curve? Why?
11. Explain the relationship between total revenue and elasticity. What will happen to
total revenue when price is increased for a product with elastic demand? Inelastic
demand? Unit elastic demand?
12. What factors influence the price elasticity of demand of a particular product?
B. 1. Complete the following table using the demand data given. Compute total revenue at each for the
seven prices and the price elasticity coefficient for each change in price. (Elasticity coefficient goes in the
blank between prices.) In the last column, indicate whether demand is elastic, unit elastic, or inelastic for
that price change.
Price
$1.00
.90
.80
.70
.60
.50
.40
Quantity
Demanded
300
400
500
600
700
800
900
Total
Revenue ($)
Elasticity
Character
Coefficient of Demand
2. Use the data from the table above. On the first of the following two graphs, plot the demand curve and
indicate the elastic, inelastic, and unit elastic portions of the demand curve. On the second graph, plot the
total revenue on the vertical axis and the quantity demanded on the horizontal axis. (Note: the scale for
quantity demanded on the x-axis needs to be the same for both graphs.)
a. As price decreases from $1.00 to $.70, is demand elastic,
inelastic or unit elastic? __________________
b. As price decreases from $.70 to $.60 is demand elastic,
inelastic, or unit elastic? __________________
c. As price decreases from $.60 to $.40 is demand elastic,
inelastic, or unit elastic? __________________
d. What is the relationship between total revenue and
elasticity?