Suppose that you just got a raise at work and are trying to figure out how you
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Question:
Suppose that you just got a raise at work and are trying to figure out how you are going to spend the additional money. Given the table below, answer the following:
% Change in Income | % Change in Quantity Demanded of Good A |
-2% | -3% |
0% | -2% |
4% | -1% |
6% | 0% |
8% | 4% |
10% | 6% |
a. Calculate the elasticity of income (EY) for Good A if your raise was 8%
b. Is Good A an inferior or normal good.
c. At what point does Good A become an inferior good?
% Change in Price of Good A | % Change in Quantity Demanded of Good A | % Change in Quantity Demanded of Good B |
-15 | 20 | -5 |
-10 | 6 | -3 |
-5 | 5 | 2 |
Suppose that the price of Good A decreases by 10%
d. What is the price elasticity of demand for Good A?
e. Is Good A price elastic or price inelastic?
f. What is the cross-price elasticity between Good A and Good B?
g. Is Good B a complement or a substitute?
Related Book For
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
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