Q1) Consider the following information for product A and related product B in consumption: Quantity A Traded Price of A Income of consumers Price of B 1,200 $1 $10,000 $1 1,800 $0.90 S8000 $0.80 1) Determine the price of elasticity of demand for product A, the income elasticity of demand for the product A and the cross-price elasticity of demand between product A and B using the mid-point formula. Based on the elasticities, explain how you classify product A in terms of its price and income elasticities of demand and also the relationship between product A and B II) Given the price of the product A Decreases by 5% consumers' income decreases by 3% and the price of the product B increase by 4%, compute the effect on the revenue from product A, assuming each change occurs seperately

Q1) Consider the following information for product A and related product B in consumption: Quantity A Traded Price of A Income of consumers Price of B 1,200 $1 $10,000 $1 1,800 $0.90 S8000 $0.80 1) Determine the price of elasticity of demand for product A, the income elasticity of demand for the product A and the cross-price elasticity of demand between product A and B using the mid-point formula. Based on the elasticities, explain how you classify product A in terms of its price and income elasticities of demand and also the relationship between product A and B II) Given the price of the product A Decreases by 5% consumers' income decreases by 3% and the price of the product B increase by 4%, compute the effect on the revenue from product A, assuming each change occurs seperately

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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