Question

At a specific point on the demand curve for backpacks, the elasticity of demand is calculated to be -0.5.a. At that point, we would describe demand as ( inelastic / elastic / unit elastic / fully supplied ).b. If the price of backpacks fell by 10%, the quantity demanded would rise by (10% /5% / 50% / 0% ) and revenue for the backpack industry would ( fall / rise) remain the same .c. If the price of backpacks rose by 20% the quantity demanded would fall by ( 20% / 10% / 25% / 40%) and revenue for the backpack industry would ( fall / rise) remain the same

Answer 1

Answer: A. Elastic , B. 5% Rise , C. 10% fall

Explanation:

the price elasticity for a normal good is negative. wen price increases  demand decreases.

demand is elastic a change in price will cause a change in  demand

a 10% decrease in in the price of backpacks will cause a 5% increase in demand and the revenue will rise.

a 20% increase in the price will cause a 10% decrease/fall in demand and revenue will fall

workings

change in demand when price decrease by 10% = -0.5(-10%) = 5%

change in demand when price increase by 20% =  -0.5(20) = 10%

Answer 2

Answer:

Inelastic; 5%; fall; 10%; rise

Explanation:

Price elasticity of demand is always negative for normal goods. This happens because of the law of demand, that demand falls with rise in price.

Price elasticity between 0 and 1 shows inelastic demand.

This means that there is smaller change in demand due to a greater change in price level.

Price elasticity of demand is -0.5.

If the price falls by 10%, demand will increase by 5%.

The revenue will fall, because of greater fall in price.

If the price increases by 20%, demand will fall by 10%.

Revenue will increase because of greater increase in price.