14. 7-5: Income Elasticity *4* When Braxton's income decreased 20 percent (-20%), his demand for shrimp decreased 16 percent (-16%). Braxton's income elasticity of demand for shrimp is (EX,I =): O " + 0.8 " and the demand for shrimp is "relatively inelastic". O "- 0.8 " and shrimp is an "inferior" good. O " + 1.25 " and the demand for shrimp is "relatively inelastic." O" + 1.25 " and the demand for shrimp is "relatively elastic". O" + 0.8 " and shrimp is a "normal" good.

14. 7-5: Income Elasticity 4 When Braxton's income decreased 20 percent (-20%), his demand for shrimp decreased 16 percent (-16%). Braxton's income elasticity of demand for shrimp is (EX,I =): O " + 0.8 " and the demand for shrimp is "relatively inelastic". O "- 0.8 " and shrimp is an "inferior" good. O " + 1.25 " and the demand for shrimp is "relatively inelastic." O" + 1.25 " and the demand for shrimp is "relatively elastic". O" + 0.8 " and shrimp is a "normal" good.

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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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?
Estimates presented in Exhibit 5 show that Android users have a higher price elasticity of demand for apps in the Google Play Store than do iPhone users in the Apple App Store. Why might Android users tend to be more sensitive to app prices than iPhone users? What categories or types of apps (for example, games/social media) do you think have the highest price elasticities?
(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 __________.
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?
(Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of Si per unit. A reduction in price to $0.20 results in an increase in quantity demanded to 70 units. Using the midpoint formula, show that these data yield a price elasticity of 0.25. By what percentage would a 10 percent rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve?
Using the following equation for the demand for a good or service, calculate the price elasticity of demand (using the point form), cross-price elasticity with good x and income elasticity. Q=82P+0.10I+Px Q is quantity demanded, P is the product price. P1 is the price of a related good, and I is income. Assume that P= $10, I = 100, and Px = 20.
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