Assume that the percentage change of the price of product A is 5% (%Px and the percentage change of quantity demanded is - 10% (%Δqd), Find the following, a) The price elasticity of demand b) Is the demand for this product elastic or inelastic? c) If the price of the product A increases, What happens to total revenue? (increases or decreases) d) if the price increases by 1% by how much quantity demanded will decrease (more than 1%, less than 1%, or by exactly by 1%)
1) Assume that the percentage change of the
a) The
b) Is the demand for this product elastic or inelastic?
c) If the price of the product A increases, What happens to total revenue? (increases or decreases)
d) if the price increases by 1% by how much quantity demanded will decrease (more than 1%, less than 1%, or by exactly by 1%)
2) Assume that the percentage increase in the price of product X ( %ΔPx) is 4% and the percentage change in quantity demanded in product Y ( %Δqd) is -5%, find the cross price elasticity (Eyx), are product X and Y substitutes or complements?
3) Assume that the percentage increase in income (%ΔI) is 4% and the percentage decrease in the quantity demanded (%Δq) is -6%, find income elasticity (EI), Is this product a normal or inferior product?
4) Is the elasticity for Corn flakes cereal is greater of less than the elasticity of cereal in general? Why? (the answer is from determinants of demand elasticity)
5) Is the demand for tooth pick elastic or inelastic? Why? (the answer is from determinants of demand elasticity).
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