To calculate the elasticity of demand for each of the goods and determine the type of elasticity (Inelastic, Elastic, or Unitary Elastic), we can use the following formula for price elasticity of demand (PED):
\[PED = \frac{\% \text{ Change in Quantity Demanded}}{\% \text{ Change in Price}}\]
1. For Bread:
- Initial Price (\(P_1\)) = $1.50
- New Price (\(P_2\)) = $2
- Initial Demand (\(Q_1\)) = 10 loaves/month
- New Demand (\(Q_2\)) = 9 loaves/month
Calculate the percentage change in quantity demanded (\(%\Delta Q\)) and the percentage change in price (\(%\Delta P\)):
\[%\Delta Q = \frac{Q_2 - Q_1}{Q_1} \times 100\% = \frac{9 - 10}{10} \times 100\% = -10\%\]
\[%\Delta P = \frac{P_2 - P_1}{P_1} \times 100\% = \frac{2 - 1.50}{1.50} \times 100\% = 33.33\%\]
Now, calculate the price elasticity of demand (\(PED\)):
\[PED = \frac{-10\%}{33.33\%} \approx -0.30\]
Since the elasticity is less than 1 (in absolute value), the demand for bread is **inelastic**.
2. For BobbleHeads:
- Initial Price (\(P_1\)) = $5
- New Price (\(P_2\)) = $6
- Initial Demand (\(Q_1\)) = 8/month
- New Demand (\(Q_2\)) = 1/month
Calculate the percentage change in quantity demanded (\(%\Delta Q\)) and the percentage change in price (\(%\Delta P\)):
\[%\Delta Q = \frac{Q_2 - Q_1}{Q_1} \times 100\% = \frac{1 - 8}{8} \times 100\% = -87.5\%\]
\[%\Delta P = \frac{P_2 - P_1}{P_1} \times 100\% = \frac{6 - 5}{5} \times 100\% = 20\%\]
Now, calculate the price elasticity of demand (\(PED\)):
\[PED = \frac{-87.5\%}{20\%} \approx -4.38\]
Since the elasticity is greater than 1 (in absolute value), the demand for BobbleHeads is **elastic**.
So, the elasticity for bread is inelastic, and the elasticity for BobbleHeads is elastic.