1.
Scenario: The price of crude oil increases from Php 3,000 to Php 3,750 per barrel, but the
quantity supplied increases only from 1 million barrels to 1.05 million barrels.
Compute for the elasticity of supply and explain.
2. Scenario: After a typhoon, the price of rice increases from Php 50 to Php 70 per kilo, but the
quantity supplied remains the same at 5,000 kilos.
Compute for the elasticity of supply and explain
3. Scenario: The price of hotel rooms rise during the holiday season from Php 5,000 to Php
5,750, but the number of available rooms only from 200 to 210 rooms.
Compute for the elasticity of supply and explain
4. The price of a life-saving drug increases from Php 1,000 to Php 1,500, but the quantity
demanded remains constant at 1,000 units.
Compute for the elasticity of demand and explain
5. Scenario: The price of gold jewelry increases from Php 50,000 to Php 60,000, and the
quantity demanded decreases from 200 to 160 pieces.
Compute for the elasticity of demand and explain
6. Scenario: The government imposes a tax that increases the price of cigarettes by 30%, from
Php 100 to Php 130 per pack, and the quantity demanded decreases from 10,000 to 9,500
packs (a 5% decrease).
Compute for the elasticity of demand and explain
Answer:
1. Price Elasticity of Supply=5%/25%=0.2 Elasticity: 0.2 (supply is inelastic).
The supply of crude oil is inelastic because it takes time to extract and produce oil. Even with a price
increase, it is difficult to increase the supply significantly in the short term due to the complexities of
the oil extraction process.
2. Price Elasticity of Supply=0%/40%=0 Elasticity: 0 (supply is perfectly inelastic).
In the short run, after a natural disaster, the supply of agricultural products is perfectly inelastic.
Farmers cannot immediately increase production, so the quantity supplied remains constant even
though prices rise sharply.
3. Price Elasticity of Supply=5%/15%=0.33 (supply is inelastic).
Hotel rooms are fixed in the short term, meaning it's hard to increase the supply of rooms even with
price increases. This makes the supply inelastic.
4. Price Elasticity of Demand=0%/50%=0 ;Elasticity: 000 (demand is perfectly inelastic).
The demand for life-saving medication is perfectly inelastic. No matter how much the price increases,
people must purchase the drug because it is essential for survival. The quantity demanded remains
constant regardless of price changes.
5. Price Elasticity of Demand=−20%/20%=−1.0 = 1.0 (demand is unitary elastic). Gold jewelry is
considered a luxury good, and in this case, the demand is unitary elastic, meaning that the percentage
change in price results in a proportional change in quantity demanded.
6. Price Elasticity of Demand=−5%/30%=−0.17 Elasticity: 0.17 (demand is inelastic). Tobacco products
are addictive, so even significant price increases lead to only small reductions in quantity demanded. As
a result, the demand for cigarettes is inelastic.