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Homework answers / question archive / If a 13% increase in the price of Cheerios causes a 19% reduction in the number of boxes of cereal demanded, what is the price elasticity of demand for Cheerios? The demand for cheerios is (elastic, inelastic, or unit elastic)?

If a 13% increase in the price of Cheerios causes a 19% reduction in the number of boxes of cereal demanded, what is the price elasticity of demand for Cheerios? The demand for cheerios is (elastic, inelastic, or unit elastic)?

Economics

If a 13% increase in the price of Cheerios causes a 19% reduction in the number of boxes of cereal demanded, what is the price elasticity of demand for Cheerios? The demand for cheerios is (elastic, inelastic, or unit elastic)?

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Applying the formula to the example:

Price Elasticity of Demand = % of the change in Quantity Demanded / % of the change in Price

=.19/.13

= 1.46

Because the price elasticity of demand is >1, we say that the demand is elastic. That means that the percentage change in quantity demanded was more than the percentage change in the price.

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