Question

Using the Midpoint method compute the elasticity in the following cases and explain your answers.   ...

Using the Midpoint method compute the elasticity in the following cases and explain your answers.

  

Price

Quantity Demanded

(Income = AED60,000)

Quantity Demanded

(Income = AED90,000)

50

2000

1500

75

1500

1000

1. Calculate the income elasticity of demand when income rises from AED 60,000 to AED90,000 at a price of AED 75. (1 Mark)

2. Due to COVID 19, the average price of a Jones the Grocer meal fell from AED100 to

AED 80. As a result, Slim’s quantity demanded for Jones the Grocer meals increased from 2 to 3 times per week. What would be the implied price demand elasticity? (1 Mark)

3.Last week, sellers of good B took in AED500 in total revenue on sales of 200 units of good B. This week they raised the price of B price and took in AED800 in total revenue on sales of 200 units. At the same time, the price of good A stayed the same, but sales of good A increased from 1000 units to 1600 units. Compute the cross-price elasticity between A and B. (1 Mark)

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