Answered: 1S 2.0. What can you determine about…

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1S 2.0. What can you determine about consumer demand for your product from this information?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter6: Elasticities

Section: Chapter Questions

Problem 1P

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Question

Problem four
a)
You have the following information for your product:
• The price elasticity of demand is -0.9.
The income elasticity of demand is 0.5.
1 https://www.myjoyonline.com/our-research-shows-24-drop-in-mobile-money-transactions-after-e-levy-
introduction-john-kumah/
3
The cross-price elasticity of demand between your good and a related good
is 2.0.
What can you determine about consumer demand for your product from this
information?
b)
The price elasticity of demand for urban transit fares has been estimated to lie between
-0.1 and -0.6. Based on these results, what is the economic argument for raising transit
fares? What political arguments might local governments and transit authorities
encounter in opposition to these economic arguments?

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