Adam and Barb go to the store to purchase some lottery tickets. Without looking at the...

Adam and Barb go to the store to purchase some lottery tickets. Without looking at the price, Adam says “I’ll take 10 lottery tickets,” and Barb says “I’ll take $10 worth of lottery tickets.” What is each person’s price elasticity of demand for lottery tickets? Explanation?

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Expert Solution

Price elasticity of demand(Ed)= % change in quantity demand / % change in price

Price elasticity of demand helps to measure the proportionate change in quantity demand due a unit change in price.

Ed is less than 1 or inelastic demand refers to the situation when price of the commodity does not have significant impact on quantity demand.

Ed is greater than 1 or elastic demand refers to the situation when price of the commodity does have significant impact on quantity demand.

Here, Adam does not give due importance to the price of the lottery that is price does not have much impact on Quantity demand for lottery tickets by Adam. So for Adam the demand for lottery is inelastic or Ed<1.

Barb says “I’ll take $10 worth of lottery tickets” it implies that Barb give due importance to the price that is if price increase or decrease it will have a significant impact on quantity demand for lottery tickets by Barb. So for Barb the demand for lottery is elastic or Ed>1.

Rahul Sunny answered 2 years ago

Adam and Barb go to the store to purchase some lottery tickets. Without looking at the...

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Adam and Barb go to the store to purchase some lottery tickets. Without looking at the...

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