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PED - short-answer


Question 1

'The demand for luxury cars is elastic, but the coefficient for Jaguar cars is higher than that for the luxury part of the car market as a whole'.

Why is this the case?

Question 2

'The price elasticity of demand for commuter rail travel is inelastic but that for vacation rail travel is elastic'. Comment on this fact.

Question 3

An exclusive pen manufacturer sells 4,000 pens per month at a price of 40 each. When the price is reduced to 30 sales increase to 6,000 pens per month.

(a) Calculate the price elasticity of demand for the pens over this price range.
(b) Is demand elastic, unit elastic or inelastic?
(c) Calculate the change in revenue due to the change in price.

Question 4

The table below shows the demand schedule for a good. Complete the following table, using the appropriate equation, with the total expenditure and indicate in the elasticity column whether the good is elastic or inelastic over that price range.

Price () Demand (per week) Total expenditure Elasticity - elastic / inelastic?
1 50 ****
2 40
3 30
4 25
5 20
6 16
7 13
8 10
9 8
10 5