Problem 1: Suppose the price of apples rises from $3.50 a pound to $4.00 and your consumption of apples drops from 30 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? Be sure to show the work you used to support your answer.
Problem 2: Calculate the elasticity of demand and explain the meaning of the calculation. State the factors that determine the factors that generate the elasticity of demand. Note that the elasticity is a ratio of two percent changes: one for price and one for quantity demanded. As you examine your answer, note that elasticity of demand is the ratio of TWO SEPARATE percent changes. You may use the midpoint method on or you can use the simple percent change method.