1. A B 1.Calculate the arc own price elasticity of demand between the points A and B? 2.Is the elasticity different if your go from B to A? 3.Elastic, inelastic, or unit? Why? 4.If at point B and your goal is to increase revenues should you increase or decrease price? Test Yourself

2. A B 1.Calculate the arc own price elasticity of demand between the points B and A? 2.Is the elasticity different if you go from A to B? 3.Elastic, inelastic, or unit? Why? 4.If at point B and your goal is to increase revenues should you increase or decrease price? Test Yourself Answers 1.(4/6)/(-2/8)= -0.375 2.No 3.Inelastic 4.Increase price

3. 1.The calculated own price elasticity of demand for salt is -0.1, whereas, the elasticity for fresh green peas is -2.8. Why is salt more inelastic than fresh green peas? 2.The short-run and long-run own price elasticities for gasoline are -0.2 and -0.7. Why the difference? Test Yourself

4. 1.The calculated own price elasticity of demand for salt is -0.1, whereas, the elasticity for fresh green peas is -2.8. Why is the salt elasticity more inelastic than fresh green peas? 2.The short-run and long-run own price elasticities for gasoline are -0.2 and -0.7. Why the difference? Test Yourself 1.Salt has fewer substitutes, is required to live, and is a very small percentage of total income. 2.Long-run elasticities are more elastic as consumers have time to adjust their consumption bundles.