For a particular good, a 2% increase in P causes a 12% decrease in Q demanded. Which of these situations could explain this event? This good has several substitutes in the market. This is a luxury good rather than a necessity. Consumers are very price-sensitive in this market. Any of these could explain this. None of these could explain this.

For a particular good, a 2% increase in P causes a 12% decrease in Q demanded. Which of these situations could explain this event? This good has several substitutes in the market. This is a luxury good rather than a necessity. Consumers are very price-sensitive in this market. Any of these could explain this. None of these could explain this.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 8QFR

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Suppose a 4 percent increase in income results in a 2 percent decrease in the quantity demanded of a good determine what type of good it is ?
Consider some determinants of the price elasticity of demand: • The availability of close substitutes • Whether the good is a necessity or a luxury • How broadly you define the market • The time horizon being considered A good with many close substitutes is likely to have relatively demand, since consumers can easily choose to purchase one of the close substitutes if the price of the good rises. A good's price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the same, which one has the most elastic demand? O Sports car O Amputation procedures for diabetes sufferers The price elasticity of demand for a good also depends on how you define the good. Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have demand that falls in between.
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What is the relationship between price elasticity and position on the demand curve? For example, as youmove up the demand curve to higher prices and lower quantities, what happens to the measured elasticity? How would you explain that? Income effects depend on the income elasticity of demand for each good that you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?
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		This good has several substitutes in the market.
		This is a luxury good rather than a necessity.
		Consumers are very price-sensitive in this market.
		Any of these could explain this.
		None of these could explain this.