1.8 Suppose that the average income of a consumer decreases from R18 000 to R12 000. As a result, the quantity of Product A demanded by the consumer increases from 200 units to 280 units. What is the income elasticity of demand for product A if calculated using the ARC (midpoint) formula? A. 1.42 B. -0.83 C. 0.83 D. -1.42

1.8 Suppose that the average income of a consumer decreases from R18 000 to R12 000. As a result, the quantity of Product A demanded by the consumer increases from 200 units to 280 units. What is the income elasticity of demand for product A if calculated using the ARC (midpoint) formula? A. 1.42 B. -0.83 C. 0.83 D. -1.42

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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v Question Completion Status: 28 24 20 S2 16 S1 ND1 D2 01 0 4 4 8 12 16 20 24 Q 14. If this figure depicts the market for product X, and the demand for product X changed from D2 to D1 as a result of an increase in the price of a related product Y from $45 to $55, the cross price elasticity of demand for product X (calculated at Px = $18) is and the two products are O "1/6, substitutes" "6, substitutes" O "-6, complements "1/6, complements" QUESTION 15. Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All Answers 46 24 L AUG P 13 21 .... 284
Part A. Suppose the demand for a product A is given by the following function: QA = 500 - 250*PA - 50*PB. Calculate the cross-price elasticity, if you know the following information: Price per product A (EUR) Price per product B (EUR) Quantity of A Cross-Price Elasticity of Demand (EAB) Comment 1.2 3.5 EBA < 0 meaning A and B are complemets 25 -7 Part B. Suppose the demand is given by the following function: Q = 2000 - 250*P. At what price per item of this product can total revenues be maximized? Fill in the Table gaps: Demand function Direct Price Elasticity Price per product (EUR) Q = 2000 - 250P |E| = 1 (if TRmax) 250*P = 2000 - 250*P |E| = |-250*P/(2000 - 250*P)| = 1 500*P = 2000 |-250*P| = |2000 - 250*P| P = 2000/500 P = 4
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