Question: Hello Jamie, You explained the difference in Adam and Barb's demand very clearly. I agree that Adam's behavior shows perfectly inelastic demand because his quantity
Hello Jamie, You explained the difference in Adam and Barb's demand very clearly. I agree that Adam's behavior shows perfectly inelastic demand because his quantity stays fixed at ten tickets regardless of any change in price. His purchasing decision is not influenced at all by price which is why his elasticity is zero. I also agree that Barb's purchasing behavior is more elastic than Adam's. Since she bases her decision on spending ten dollars rather than buying a fixed number of tickets her quantity demanded will adjust whenever the price changes. Even though we do not have exact price information she shows the characteristics of unit elastic demand because her total spending remains constant while the number of tickets changes with price. This reflects the idea described by Mankiw that elasticity depends on how consumers adjust quantity in response to price rather than on the amount they spend. Overall you did a great job describing how Adam's fixed quantity creates perfectly inelastic demand while Barb's flexible quantity shows greater responsiveness to price changes. Best regards, Ruben J
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
