When Rania had a monthly income of 20,000 AED, she ate out 6 times a month. Now that she makes 15,000 AED a month, she eats out 2 times a month. a)- Compute the Rania's income elasticity of demand using the midpoint method b)- Explain your answer. Is a restaurant meal a normal or inferior good to Rania

When Rania had a monthly income of 20,000 AED, she ate out 6 times a month. Now that she makes 15,000 AED a month, she eats out 2 times a month. a)- Compute the Rania's income elasticity of demand using the midpoint method b)- Explain your answer. Is a restaurant meal a normal or inferior good to Rania

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter5: Elasticity

Section: Chapter Questions

Problem 8SCQ: The avenge annual income rises from 25,000 to 33,000, and the quantity of bleed consumed in a year...

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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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