Question

1. For each of the following say either "positive," "negative," or "either."

a. The (price) elasticity of demand.

b. The (price) elasticity of supply.

c. The cross-price elasticity for substitutues.

d. The cross-price elasticity for compliments.

e. The income elasticity for a normal good.

f. The income elasticity for an inferior good.

2. When the price of good X goes from $20 to $25, the quantity goes from 100 to 65.

a. What is the elasticity of demand?

b. Is demand elastic or inelastic?

3. The income elasticity of Good Y is 1.5. If incomes increase by 10%, what happens in the market for good Y? (Your answer should include a number) Show this on a graph.

Answer 1