Question

Suppose the own price elasticity of demand for good X is -3, its income elasticity is -2, its advertising elasticity is 4, and the cross-price elasticity of demand between it and good Y is -2. Determine how much the consumption of this good will change if: Instructions:

**Enter your responses as percentages. Include a minus (-)
sign for all negative answers.**

a. The price of good X decreases by 7 percent.

b. The price of good *Y* increases by 10 percent.

c. Advertising decreases by 2 percent.

d. Income increases by 4 percent.

Answer #1

a.

Own-price elasticity = % Change in X’s consumption / % change in X’s price

-3 = % Change in X’s consumption / -7%

% Change in X’s consumption = -3 × -7%

% Change in X’s consumption = 21% (Answer)

b.

Cross-price elasticity = % Change in X’s consumption / % change in Y’s price

-2 = % Change in X’s consumption / 10%

% Change in X’s consumption = -2 × 10%

% Change in X’s consumption = - 20% (Answer)

c.

Advertising elasticity = % Change in X’s consumption / % change in advertising expenditure

4 = % Change in X’s consumption / - 2%

% Change in X’s consumption = 4 × -2%

% Change in X’s consumption = - 8% (Answer)

d.

Income elasticity = % Change in X’s consumption / % change in income

-2 = % Change in X’s consumption / 4%

% Change in X’s consumption = -2 × 4%

% Change in X’s consumption = - 8% (Answer)

Suppose the own price elasticity of demand for good X is -2, its
income elasticity is -1, its advertising elasticity is 2, and the
cross-price elasticity of demand between it and good Y is -3.
Determine how much the consumption of this good will change if:
Instructions: Enter your responses as percentages. Include a minus
(-) sign for all negative answers.
a. The price of good X decreases by 4 percent. percent
b. The price of good Y increases by...

Suppose the own price elasticity of demand for good X is -5, its
income elasticity is -1, its advertising elasticity is 4, and the
cross-price elasticity of demand between it and good Y is 3.
Determine how much the consumption of this good will change if:
Instructions: Enter your responses as percentages. Include a minus
(-) sign for all negative answers.
a. The price of good X decreases by 6 percent.
percent
b. The price of good Y increases by...

Suppose the own price elasticity of demand for good X is -5, its
income elasticity is 1, its advertising elasticity is 3, and the
cross-price elasticity of demand between it and good Y is 4.
Determine how much the consumption of this good will change if:
a) The price of good X decreases by 5 percent.
_____%
b) The price of good Y increases by 8 percent.
_____%
c) Advertising decreases by 2 percent. _____%
d) Income increases by 4...

Price Elasticity of Demand for good X: −0.34
Income Elasticity of Demand for good X: 0.56
Cross Price Elasticity of Demand for goods X and Y: 0.04
Given the information above, determine the following:
1. whether good X is elastic, unit elastic, or inelastic
2. whether good X follows the “law” of demand
3. whether good X is normal or inferior
4. whether good X is a luxury or a necessity
5. whether good X and good Y are complements,...

Suppose the
cross-price elasticity of demand between goods X and
Y is -5. How much would the price of good Y have
to change in order to change the consumption of good X by
50 percent?
Instruction: If you are entering a negative
number, be sure to use a negative sign (-).
_________percent

Explain the concepts of own-price elasticity, cross-price
elasticity and income elasticity of demand. State the factors that
determine own-price elasticity of demand for a normal good

The cross elasticity of demand for good A and good B is
minus−0.7.
This means that
A.
if the price of good A increases by 10 percent, the quantity
demanded of good B decreases by 7 percent.
B.
the goods are substitutes.
C.
if the price of good A increases by 10 percent, the quantity
demanded of good B increases by 7 percent.
D.
the goods are complements.
E.
both A and D are correct.

Suppose the cross-price elasticity of demand between goods X and
Y is 5. How much would the price of good Y have to change in order
to change the consumption of good X by 20 percent? percent

If the cross-price elasticity of demand between Good A and Good
B is 3, the price of Good B increases, and the price elasticity of
demand for Good B is inelastic, we can expect to see a ________
change in the quantity demanded for Good A.
a.positive, zero
b.positive, small
c.positive, large
d.negative, one-for-one negative,
e.infinite

1) The income elasticity of demand for Good Z is –0.2, while the
cross-price elasticity of demand between Good Z and Good Y is 1.63.
Which of the following statements is correct regarding Good Z?
Group of answer choices
Good Z is a inferior good, and Goods Z and Y are
complements.
Good Z is an inferior good, and Goods Z and Y are
substitutes.
Good Z is a normal good, and Goods Z and Y are complements.
Good Z...

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