Product A is an inferior good with no close substitutes. It is also a complement to product B. Which describes product A? O A. income elasticity of demand: positive; cross elasticity of demand with respect to product B: positive B. income elasticity of demand: positive; cross elasticity of demand with respect to product B: negative OC.income elasticity of demand: negative; cross elasticity of demand with respect to product B: positive D. income elasticity of demand: negative; cross elasticity of demand with respect to product B: negative

Product A is an inferior good with no close substitutes. It is also a complement to product B. Which describes product A? O A. income elasticity of demand: positive; cross elasticity of demand with respect to product B: positive B. income elasticity of demand: positive; cross elasticity of demand with respect to product B: negative OC.income elasticity of demand: negative; cross elasticity of demand with respect to product B: positive D. income elasticity of demand: negative; cross elasticity of demand with respect to product B: negative

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 6PA: Suppose that your demand schedule for DVDs is as follows: Price Quantity Demanded (income = 10,000)...

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Suppose that your demand schedule for DVDs is as follows: Price Quantity Demanded (income = 10,000) Quantity Demanded (income = 12,000) 8 40 DVDs 50 DVDs 10 32 45 12 24 30 14 16 20 16 8 12 a. Use the midpoint method to calculate your price elasticity of demand as the price of DVDs increases from 8 to 10 if (i) your income is 10,000 and (ii) your income is 12,000. b. Calculate your income elasticity of demand as your income increases from 10,000 to 12,000 if (i) the price is 12 and (ii) the price is 16.
The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?
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