You may use graphs if you wish, but they are not required. Question 1 In the mar

Question

You may use graphs if you wish, but they are not required. Question 1 In the market for bikes, when the price is $1000, consumers demand five hundred units. Suppose that the price of bikes falls by $100, and the quantity demanded subsequently increases by 100 units. Explain whether the following statements are true, false, or uncertain: At the initial price, for the change described, demand for bikes is unitary elastic. At the new price, if the price of bikes fell again, demand for bikes would be more elastic than in part (a). If the price of bikes rose above $1000, then at that new price, demand for bikes would be unitary elastic.

Explanation / Answer

I find elasticity by finding the slope by change inprice/change in demand. pirce goes down by 100 and demand goes upby 100. so we find elasticity is -100/100=-1. so n--1 which makes inunitary eleastic. Then A) is true. With the given information, we know that the price elasticitywouldn't change. So B) is false. C) would also be true because the elasticity would remainunitary.

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