1) Does the news clip give data to calculate the price elasticity of demand or the price elasticity of supply? What is its value?
The price elasticity of ______________ and it equals _____________.
The news clip describes an increase in the quantity of used cars bought and sold and a rise in the price. Does this describe a movement along the demand curve or a movement along the supply curve? Can we use the data in the news clip to calculate the price elasticity of demand or the price elasticity of supply?
As the demand for used cars increases, the quantity of used cars supplied increases and the price rises. If the supply of used cars did not change, we can calculate the price elasticity of supply. The percentage change in quantity supplied divided by percentage change in price is 10 percent/28 percent = 0.36.
