Course Activity - Unit 3
Uopeople
BUSA 1103-01 - AY2024-T3
Microeconomics
Topic: Analyzing the Elasticity of Demand: A Case Study of Emma's Boutique
Price elasticity of demand, also known as price elasticity of demand, is defined as the ratio
of a change in quantity (percentage) to the percentage change in price. This occurs when a
price change of 1% is considered to be the change in demand for a single item with a
change in its price. (Sayeh, 2018)
Factors Affecting the Elasticity of Supply: There are several factors that directly affect the
elasticity of supply of a good, including inventory, time period, availability of substitutes,
and spare capacity. The state of these factors for a particular good will determine whether
the price elasticity of supply is elastic or inelastic with respect to a change in price.
Q1. Define and calculate price elasticity of demand for a piece of clothing, Emma.
Price elasticity of demand (PED) is the responsiveness of the quantity demanded of a good
to a change in its price. It is calculated by dividing the percentage change in quantity
demanded by the percentage change in price.
To calculate the PED for Emma's clothing item:
Percentage change in quantity demanded = (New quantity - Old quantity) / Old quantity *
100
%33.33- = 100 * 150 / )150 - 100( =
Percentage change in price = (New price - Old price) / Old price * 100
%20 = 100 * 50 / )50 - 60( =
PED = Percentage change in quantity demanded divided by the percentage change in price
1.67- = .33- =
The price elasticity of demand is negative. This is because the relationship between the
item's price and quantity demanded is inverse.
a. Based on your calculations, determine whether the demand for this item is elastic or
inelastic.
Uopeople
BUSA 1103-01 - AY2024-T3
Microeconomics
Topic: Analyzing the Elasticity of Demand: A Case Study of Emma's Boutique
Price elasticity of demand, also known as price elasticity of demand, is defined as the ratio
of a change in quantity (percentage) to the percentage change in price. This occurs when a
price change of 1% is considered to be the change in demand for a single item with a
change in its price. (Sayeh, 2018)
Factors Affecting the Elasticity of Supply: There are several factors that directly affect the
elasticity of supply of a good, including inventory, time period, availability of substitutes,
and spare capacity. The state of these factors for a particular good will determine whether
the price elasticity of supply is elastic or inelastic with respect to a change in price.
Q1. Define and calculate price elasticity of demand for a piece of clothing, Emma.
Price elasticity of demand (PED) is the responsiveness of the quantity demanded of a good
to a change in its price. It is calculated by dividing the percentage change in quantity
demanded by the percentage change in price.
To calculate the PED for Emma's clothing item:
Percentage change in quantity demanded = (New quantity - Old quantity) / Old quantity *
100
%33.33- = 100 * 150 / )150 - 100( =
Percentage change in price = (New price - Old price) / Old price * 100
%20 = 100 * 50 / )50 - 60( =
PED = Percentage change in quantity demanded divided by the percentage change in price
1.67- = .33- =
The price elasticity of demand is negative. This is because the relationship between the
item's price and quantity demanded is inverse.
a. Based on your calculations, determine whether the demand for this item is elastic or
inelastic.
