Last Updated 01 Sep 2020

# Apple’s Price Elasticity

Category Apple, Microeconomics
Words 330 (2 pages)
Views 473

## Price Elasticity

Q.: Suppose the price of apples rises from \$3 a pound to \$3.50 and your consumption of apples drops from 35 pounds of apples a month to 20 pounds of apples. Calculate your price elasticity of demand of apples. What can you say about your price elasticity of demand of apples? Is it Elastic, Inelastic, or Unitary Elastic?

A.: The concept of the price elasticity of demand (characterized by the elasticity coefficient Ed) can give an idea about the responsiveness of the demand to any changes of the price for goods or services.

Order custom essay Apple’s Price Elasticity with free plagiarism report

GET ORIGINAL PAPER

## The demand can be:

• perfectly inelastic, when a change in price does not cause any changes in quantity demanded (Ed=0),
• relatively inelastic, when a percentage change in price causes less percentage change in quantity demanded (Ed<1),
• relatively elastic, when a percentage change in price causes a greater percentage changes in quantity demanded (Ed>1),
• unitary elastic, when a percentage change in price causes the same percentage change in quantity demanded (Ed=1),
• perfectly elastic, when a change in price causes total loss of demand (Ed=?).

In terms of an elastic demand, any increase of the price causes decrease in total revenues. Thus, the revenues that seller could receive before the price was increased totaled: TR1 =  35 × 3 = 105 \$, and the revenues after the price became \$3.5 are: TR2 = 20 × 3.5 = 70 \$. TR1 > TR2 in terms of an increase in price. Therefore, the demand is elastic.

To calculate the elasticity coefficient, it is possible to use Symmetric Midpoint Formula, according to which the coefficient Ed can be defined as the ratio of average percentage change in quantity demanded (?Q%) and average percentage change in price (?P%). In our case, midpoint percentage change for quantity is ?Q% = (20-35)/((20+35)/2) = -54.54% , and midpoint percentage change for price is ?P% = (3.5-3)/((3.5+3)/2) = 15.38%. Therefore, Ed = ?Q% / ?P% = -54.4 % / 15.38 % = -3.546. Since | Ed | > 1, the demand is relatively elastic.

## References

• Abowd, J. M. (1999, May 12). The Concept of Elasticity. Cornell University.
• Retrieved April 3, 2009: <http://instruct1.cit.cornell.edu/Courses/econ101-dl/lecture-elasticity.html>.

This essay was written by a fellow student. You can use it as an example when writing your own essay or use it as a source, but you need cite it.

## Get professional help and free up your time for more important courses

Starting from 3 hours delivery 450+ experts on 30 subjects
get essay help 124  experts online

Did you know that we have over 70,000 essays on 3,000 topics in our database?

Explore how the human body functions as one unit in harmony in order to life