Answered: QUESTION 8 (a) Are goods X and Y…

QUESTION 8 (a) Are goods X and Y substitutes or complements? Explain. (b) Is the demand for good X elastic or inelastic? Explain. O 15 V ∙IC, IC, X₁ B X, X, B, IC₁ B₂ B, X

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 15CTQ: Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the...

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Economists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?
(Other Elasticity Measures) Complete each of the following sentences: a. The income elasticity of demand measures, for a given price, the __________ in quantity demanded divided by the __________ income from which it resulted. b. If a decrease in the price of one good causes a decrease in demand for another good, the two goods are __________. c. If the value of the cross-price elasticity of demand between two goods is approximately zero, they are considered __________.
As the price of good X rises from 10 to 12, the quantity demanded of good Y rises from 100 units to 114 units. Are X and Y substitutes or complements? What is the cross elasticity of demand?
Income Effects depend on the income elasticity of demand for each good limit 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?
Quantities Purchased Quantities PurchasedIncome Prices Good X Good Y$30,000 Px = $6, Py = $3 2 2050,000 Px = $6, Py = $4 5 10Refer to Table.(i) Using the information in the table, calculate the income elasticity of demand for good X and characterize the good. Use the midpoint formula. (ii) Can you calculate the income elasticity of demand for good Y? If you can, show your calculation and characterize the good. If you cannot, explain why.
Which of the following causes the cross-elasticity of demand between two goods to be lower?(Faster) a. The greater the income elasticities of demand for the two goods b. The more they are regarded as dissimilar by consumers c. The greater the price elasticities of demand for the two goods d. The greater the difference in price between the two goods
b. Consider the demand for a good. At price ` 4, the demand for the good is 25 units.Suppose price of the good increases to ` 5, and as a result, the demand for the good fallsto 20 units. Calculate the price elasticity (05)
3. We are looking at the relationship between goods A and B. If the cross price elasticity of demand for good A is 2.37 and the price of A goes up, the demand for B will?
d. Calculate the cross-price elasticity Eg. Are the goods X and R substitutes or complements? Explain how a 5 percent decrease in the price of related good R would affect demand for X, all other factors affecting the demand for X remaining the same.
Explain and ilustrate grpaphically the effect of: 1. An increase in income upon the demand curve of an inferior good. 2. A drop in the price of product S upon the demand for substitute product T. 3. A decline in income upon the demand curve of a normal good. 4. An increase in the price of product J upon the demand for complementary good K.
c. What is a “complementary good”? Give an example. Does it have a positive or negative cross-elasticity of demand? Assume that the price cross elasticity of demand for muffins with respect to the price of coffee is (negative) - 0.7.
B) When the price of Good A is $27, the quantity demanded of Good B is 1,200 units. When the price of Good A falls to $23 the quantity demanded of Good B falls to 800 units. i. Calculate the cross elasticity of demand ii. Are the goods substitutes or complements? Explain your choice. iii. Explain how cross elasticity of demand is used. vi. Explain how income elasticity of demand is used.