How many apps will be demanded at a price

Reference no: EM132729083

Price Elasticity

The response of consumers to a change in price is measured by the price elasticity of demand, as follows: Elasticity = percent drop in quantity demanded / percent increase in price1) Suppose the following demand exists for iPhone apps: (quantity is in millions)

Price $10 $9 $8 $7 $6 $5 $4 $3

Quantity demanded 2 3 4 5 6 7 8 9

Question a. At $9, what quantity is demanded?

Question b. If the price drops to $6, what quantity is demanded?

Question c. Is demand elastic or inelastic in that price range?

Question d. If advertising convinces people to demand 3 million more apps at every price, how many apps will be demanded at a price of $972)

Using this demand schedule

Price (per pair) $120 $100 $80 $60 $40

Quantity demanded (in pairs per year) 6M 10M 15M 20M 26M

Question a. As the price drops from $120 to $100 a pair, is demand elastic, unitary elastic, or inelastic?

Question b. As the price drops from $80 to $60 a pair, is demand elastic, unitary elastic, or inelastic?

Question c. As the price drops from $60 to $40 a pair, is demand elastic, unitary elastic, or inelastic?

Question d. What is the significance of these calculations of Elasticity?

Reference no: EM132729083

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