Task Cards for Elasticity

(Randomly place students in groups of three or pairs in a small class. Pass out the cards. Give
students 3 minutes to complete the required task. At the end of 3 minutes call time and have
students pass their task card to the next group. Continue in 3 minute time periods until all
groups have completed the 10 tasks. When completed, randomly asks groups to explain their
answers. An incentive to participate might be a quiz at the end of class.)

1. Is price elasticity of demand the 2. If the coefficient of elasticity of

same as the slope of the demand demand is .5, a 10% increase in price
curve? Why or why not? causes what % change in QD?

3. The price of a Dooney Burke bag 4. Apple is thinking of lowering the

rises from $100 to $150 while the QD price of IPODs. If the price elasticity
falls from 1200 to 900. Calculate the of demand is .8, what advice would
elasticity of demand. What did this you give to Apple? Why?
number tell you?

5. The price of gasoline is increasing 6. Johns income rises from $20,000 to

again. Based on a 1.25 coefficient of
elasticity of demand, what would you
expect to see happening to the
revenues of oil companies? Why?
$22,000 while his QD for hamburgers
changes from 2 lbs per week to 1 lb
per week. What is Johns income
elasticity of demand for hamburgers?
What does that tell you?

7. During a recession, Wal-Mart sees 8. If price elasticity of demand is .4,

an increase in purchases of spam. what price increase in cigarettes
Using the economic concept of would be necessary to decrease
elasticity, explain why this might purchases of cigarettes by 20%?
happen. Explain.

9. Suppose the cross elasticity of 10. If the elasticity of supply for

demand for products A and B is 3.6 computers was .8 in 1987, but is 1.25
and for products C and D is -5.4. What in 2005, what can you conclude from
can you conclude about products A this information? What do you think
and B? C and D? Explain. might have caused this change?
Some questions are from Mankiw, Principles of Economics, 2nd ed.

Answers:

1. No, slope is change is price divided by change in quantity. Elasticity is

percentage change in quantity demanded divided by percentage change in
price.

2. 5%

3. .71

4. Inelastic demand, P decreases and TR decreases, advise against lowering

price

5. Elastic demand, P increases and TR decreases, expect to see oil company

revenues decline

6. -7, inferior good

7. If spam is an inferior good, when income declines during a recession, then

QD of spam will increase

8. 50%

9. A and B are substitutes, C and D are complements

10. Inelastic supply in 87, elastic supply currently. Resources to produce

computers are more easily acquired today, for instance more human
resources with these skills