Answered: If the cross elasticity of demand for…

If the cross elasticity of demand for two goods, A and B, is +5,0, then this implies that these goods must be A luxuries. B complements. C necessities. D substitutes. E income inferior good

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter6: Elasticity

Section: Chapter Questions

Problem 3WNG: The quantity demanded of good X rises from 130 to 145units as income rises from 2,000 to 2,500 a...

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Question

If the cross elasticity of demand for two goods, A and B, is +5,0, then this implies that these goods must be

A luxuries.
B complements.
C necessities.
D substitutes.
E income inferior goods.

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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.
Plot the price and quantity data given in the demand schedule of exercise 1. Put price on the vertical axis and quantity on the horizontal axis. Indicate the price elasticity value at each quantity demanded. Explain why the elasticity value gets smaller as you move down the demand curve.
Prove that price elasticity of demand is not the same as the slope of a demand curve.
The quantity demanded of good X rises from 130 to 145units as income rises from 2,000 to 2,500 a month. What is the income elasticity of demand for good X?
(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 __________.