Question

. Suppose each of the following cases increases your quantity
demanded for Good X by 20 percent. What can you determine about
your demand for Good X from the information? a. The price of Good X
decreases by 22 percent. b. The price of Good Y increases by 10
percent. c. Your income increases by 25 percent.

Answer #1

Ans) Percentage change in quantity demanded = + 20%

1) Own price elasticity = %change in quantity demanded of good X ÷ %change in price of good X

Own price elasticity = 20÷(-22) = -0.909 = -0.91

Since elasticity is less than 1, demand for good X is inelastic.

(If elasticity is more than 1 then demand is elastic)

2) Cross price elasticity = %change in quantity demanded of good X ÷ %change in price of good Y

Cross price elasticity = 20÷10 = 2

Since cross price elasticity is positive, good X and good Y are substitutes. Further, since elasticity is more, goods are strong substitutes.

(Cross price elasticity is negative for complementary goods)

3) Income elasticity of demand = %change in quantity demanded of good X ÷ %change in income

Income elasticity = 20÷25 = 0.8

Since income elasticity is positive, good is normal good. Further, since elasticity is less than 1, good is necessity.

(Income elasticity is negative for inferior goods. )

When the price of good "X" increases 20 percent (+20%), Harry
decreases his quantity demanded of "X" by 25 percent while Meghan
decreases her quantity demanded of "X" by 15 percent. Harry's
demand for good "X" is (relatively inelastic / unitary elastic /
relatively elastic) and Meghan's demand for good "X" is (relatively
inelastic / unitary elastic / relatively elastic).
A. Relatively inelastic; relatively
inelastic.
B. Relatively inelastic; relatively
elastic.
C. Unitary elastic; relatively
elastic.
D. Relatively elastic; relatively
elastic.

Suppose the quantity of good X demanded by consumer 1 is given
by: Q DX1 =62 – 3P X + 0.35I + 0.3P Y And the quantity of good X
demanded by consumer 2 is given by: Q DX2 = 10 – 2.5P X + 0.2I +
0.6P Y Answer the following questions and ensure that you show ALL
calculations.
(a) What is the market demand for good X? 3 marks
(b) Using the first demand function: (Q DX1 =...

A measure of the rate of percentage change of quantity demanded
with respect to price, holding all other determinants of demand
constant is
a.
Income elasticity of demand
b.
Own price elasticity of demand
c.
Price elasticity of market equilibrium
d.
Cross price elasticity of demand
The value of the income elasticity of demand coefficient for
Good X is given as 0.1. This means that
a.
as income increases by 10 percent, quantity demanded rises by 1
percent.
b.
as income...

A price change causes the quantity demanded for a good to
increase by 20 percent and the total revenue of that good decreases
by 15 percent. What can you say about the price elasticity of
demand at this point.
It's elastic
It's inelastic
It's unitary elastic
It's perfectly elastic

Suppose income increases by 20 percent and, as a result, the
quantity of a particular brand of automobile demanded (holding the
price for this particular automobile constant) decreases by 4
percent.
The income elasticity of demand for this brand of car is
_____?
This particular brand of automobile is inferior or normal
goo
In another example, suppose market research shows that a
particular brand of truck is a normal good and a luxury.
If so, then the income elasticity of...

Suppose the relationship between Demand for good x (Qx) can be
described by the following linear relationship (Py: price of good
y, I = income):
Qx= 120 – 6Px + 5Py + 3 I
From the demand relationship above, you can conclude: Goods X
and Y are substitute/complementary goods
because_______________________, and a decrease in Py would cause
quantity demanded/demand of Good X to increase/decrease.
Suppose Py = $5 per unit, and I = $10, and Px = $20. At these...

The following data below represent the demand schedule for good
X.
Price ($)
Quantity Demanded
22
32
18
48
14
64
10
80
8
96
Use the midpoint formula to determine the price elasticity of
demand at the following price points:
$22 and $18

Suppose the price of apples increases from $20 to $28, and in
response quantity demanded decreases from 100 to 84. Using the
mid-point formula, what is the price elasticity of demand? (Note:
your answer should be correct to two decimal places; and be sure to
express your answer as a positive number.)

CLASS: Elastic or Inelastic?
A price change causes the quantity demanded of a good to drop by
20 percent, yet total revenue still increases by 10 percent. Is
demand elastic or inelastic? How can you tell?

A price change causes the quantity demanded of a good to
increase by 20 percent, while the total revenue of that good
increases by 15 percent. Is the demand curve elastic or inelastic?
Explain.

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