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Demand Analysis: Price Elasticity Calculations

This document discusses demand analysis and calculating different types of elasticities. It provides examples of calculating point elasticity to determine if a good is inelastic, elastic, or unitary elastic based on changes in quantity and price. It also gives examples of calculating arc elasticity. Finally, it shows how to calculate point cross price elasticity to determine if two goods are substitutes or complements based on how their quantities change relative to each other with a change in price.

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sherryl cao
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11 views5 pages

Demand Analysis: Price Elasticity Calculations

This document discusses demand analysis and calculating different types of elasticities. It provides examples of calculating point elasticity to determine if a good is inelastic, elastic, or unitary elastic based on changes in quantity and price. It also gives examples of calculating arc elasticity. Finally, it shows how to calculate point cross price elasticity to determine if two goods are substitutes or complements based on how their quantities change relative to each other with a change in price.

Uploaded by

sherryl cao
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd

TOPIC 6: DEMAND ANALYSIS

[Link] own price elasticity/point elasticity and identify if inelastic, elastic or unitary elastic.

Quantity of Own Price Total


Price of Software Sofware Sold Elasticity Revenue
Px Qx Px * Qx
A 0 850 0
B 100 750 75,000
C 200 650 130,000
D 300 550 165,000
E 400 450 180,000
F 500 350 175,000
G 600 250 150,000
H 700 150 105,000
I 800 0 0

4 Point Elasticity F to G -0.29


0.20
-1.43 elastic

5 Point Elasticity G to H -0.40


0.17
-2.40 elastic
6 Point Elasticity H to I -1.0
0.1
-7.0 elastic
B. Calculate Arc elasticity and identify if inelastic, elastic or unitary elastic.

1 Quantity Price
Q1 343,000 160,800 P1
Q2 335,000 164,000 P2

2 Quantity Price
Q1 100,000 15,000 P1
Q2 80,000 18,000 P2

3 Quantity Price
Q1 15,000 25 P1
Q2 13,000 38 P2

4 Quantity Price
Q1 45,000 250 P1
Q2 42,000 225 P2

5 Quantity Price
Q1 100,000 50 P1
Q2 110,000 60 P2

6 Quantity Price
Q1 300,000 6 P1
Q2 320,000 5 P2
C. Calculate point cross-price elasticity and identify if goods are substitutes or complements.

1 Original New
Quantity Price Quantity Price
Good X 50 30
Good Y 30 10 60 15

= #DIV/0! complement

2 Original New
Quantity Price Quantity Price
Good X 1,000 950
Good Y 1,200 300 1,400 380

3 Original New
Quantity Price Quantity Price
Good X 150,000 148,000
Good Y 130,000 90 132,000 91

4 Original New
Quantity Price Quantity Price
Good X 60 70
Good Y 50 20 55 25

5 Original New
Quantity Price Quantity Price
Good X 1,000 1,200
Good Y 1,500 15 1,400 20

6 Original New
Quantity Price Quantity Price
Good X 20,000 25,000
Good Y 18,000 6 20,000 7

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