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Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 13PAE

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Question

You have the following information for your product:
i. The price elasticity of demand is -0.9.
ii. The income elasticity of demand is 0.5.
iii. 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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