Author Question: In the figure above, what is Gap's excess capacity? A) 32 jackets per day B) zero C) 4 jackets ... (Read 47 times)

formula1

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In the figure above, what is Gap's excess capacity?
 
  A) 32 jackets per day
  B) zero
  C) 4 jackets per day
  D) 132 jackets per day

Question 2

If the percentage change in quantity demanded is greater than the percentage change in price, can you determine if the demand is elastic, unit elastic, or inelastic? Explain your answer.
 
  What will be an ideal response?


yasmina

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Answer to Question 1

A

Answer to Question 2

The demand is elastic. The formula for the price elasticity of demand is the percentage change in the quantity demanded divided by the percentage change in the price. And, if the elasticity of demand exceeds one, then the demand is elastic. In this case, the percentage change in the quantity demanded is larger than the percentage change in the price, so the elasticity of demand will be greater than one. Hence the demand is elastic.



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