Question

Suppose the price elasticity of demand 1.15

If​ so, then the demand for cereal is ​elastic or inelastic.

In another​ example, assume the price elasticity of demand for a particular magazine is negative .1.16

The demand for the magazine is inelastic. or . • Elastic

Answer 1

Price elasticity is calculated as %Change in the Quantity / %Change in the Price.

1) When the change in the quantity in relation to price is more than one it is considered that the good is price elastic. For example, cereal was sold at a price of $10 per pound with a 100% increase in the price of cereal the demand increased by 115%. Which is more than 100% so we can say the demand for cereal is price elastic.  

(Important point here is that price elasticity is generally negative showing a negative relationship between price and demand, if price increases the demand fall but there are certain luxury good which doesn't follow this rule like caviar, people believe that costlier the caviar is the better it tastes so they demand more. Here we have used cereals which generally doesn't show an increase in demand with an increase in price, but it just an example so we take it. A positive price elastic value is an extreme case.)

In the second question, we have Magazine with response to a %change in price the demand has decreased, that is why we have negative elasticity but it is above 1(say 10% increase in price has lead to 11.6% decrease in demand). So we can say the demand for the magazine is price elastic.