MIT economist Jerry Housman has estimated the price elasticity of demand for Post Raisin Bran cereal to be -2.5 and the price el

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MIT economist Jerry Housman has estimated the price elasticity of demand for Post Raisin Bran cereal to be -2.5 and the price el

asticity of demand for all types of breakfast cereals to be -0.9. The demand for Post Raisin Brand cereal is:__________ 1. elastic 2. inelastic the demand for all types of breakfast cereals is:_____ 1. inelastic2. elastic

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1 answer:

Diano4ka-milaya [45] · Answer 1 · 2021-12-29T07:29:32+03:00

Answer:

The demand for Post Raisin Brand cereal is: ELASTIC

the demand for all types of breakfast cereals is: INELASTIC

Explanation:

To calculate the price elasticity of demand (PED) we can use the following formula:

PED = % change in quantity / % change in price

If PED > 1, the demand is price elastic
If PED = 1, the demand is price unitary
If PED < 1, the demand is price inelastic

*The PED always results in a negative number, e.g. price deceases, quantity increases, but for practical reasons we convert the negative number into a positive (we use absolute values) when we are determining the elasticity.