a). The demand for good A is written as follows: Q₁ = 300 - 3PA +2PB-0.2Y B where Q₁ is the quantity demanded of good A, P, is the price of good A in dollars, P, is the price of good B in dollars, and Y is the consumer's income in dollars. If P₁= $10 and P₂ = $15 (1) Calculate the quantity of good A demanded when Y = $500 and when Y = $1000 (ii) Calculate the income elasticity of demand for good A. According to your answer, is the good a normal or an inferior one? b). Consider the case where the manager of Asylum finds that customers fell from 250 to 50 on Sunday nights when the price of admission was increased from $200 to $300. Calculate the price elasticity of demand. Comment on the demand for night activity.
a). The demand for good A is written as follows: Q₁ = 300 - 3PA +2PB-0.2Y B where Q₁ is the quantity demanded of good A, P, is the price of good A in dollars, P, is the price of good B in dollars, and Y is the consumer's income in dollars. If P₁= $10 and P₂ = $15 (1) Calculate the quantity of good A demanded when Y = $500 and when Y = $1000 (ii) Calculate the income elasticity of demand for good A. According to your answer, is the good a normal or an inferior one? b). Consider the case where the manager of Asylum finds that customers fell from 250 to 50 on Sunday nights when the price of admission was increased from $200 to $300. Calculate the price elasticity of demand. Comment on the demand for night activity.
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 31CTQ: Economists define normal goods as having a positive income elasticity. We can divide normal goods...
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Transcribed Image Text:Question 14
a). The demand for good A is written as follows:
Q₁ = 300-3PA +2PB-0.2Y
where Q₁ is the quantity demanded of good A, P, is the price of good A in dollars, P₁ is the price
of good B in dollars, and Y is the consumer's income in dollars. If P₁ = $10 and P₂ = $15
(i) Calculate the quantity of good A demanded when Y = $500 and
when Y = $1000
(ii) Calculate the income elasticity of demand for good A. According to your answer, is the good
a normal or an inferior one?
b). Consider the case where the manager of Asylum finds that customers fell from 250 to 50 on
Sunday nights when the price of admission was increased from $200 to $300. Calculate the
price elasticity of demand. Comment on the demand for night activity.
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