Calculate the income elasticity of demand (using the midpoint method) when average income increases from $20,000 to $30,000, when the price of a pencil is $4.50. * Quantity demanded (average income is $20,000) 2,400 1,600 800 Quantity demanded (average income is $30,000) 3,600 2,800 2,400 1,800 Pencil price $4.50 $5.50 $6.50 $7.50 400

Calculate the income elasticity of demand (using the midpoint method) when average income increases from $20,000 to $30,000, when the price of a pencil is $4.50. * Quantity demanded (average income is $20,000) 2,400 1,600 800 Quantity demanded (average income is $30,000) 3,600 2,800 2,400 1,800 Pencil price $4.50 $5.50 $6.50 $7.50 400

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter5: Price Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 3SQP

See similar textbooks

Similar questions

Plot the price and quantity data given in the demand schedule of exercise 1. Put price on the vertical axis and quantity on the horizontal axis. Indicate the price elasticity value at each quantity demanded. Explain why the elasticity value gets smaller as you move down the demand curve.
Suppose you could buy shoes one at a time, miter than in pain. What do you predict the cross-price elasticity for left shoes and right shoes would be?
Isabella always spends $50 on red roses each month and simply adjusts the quantity she purchases as the price changes. What can you say about Isabella's elasticity of demand for roses?
The price elasticity of the demand for gasoline is -0.02. The price elasticity of demand for gasoline at Joe’s 66 station is -1.2. Explain what might account for the different elasticities.
If the elasticity of demand for hamburgers equals 21.5 and the quantity demanded equals 40,000, predict what will happen to the quantity demanded of hamburgers when the price increases by 10 percent. If the price falls by 5 percent, what will happen?
The price elasticity of demand for personal computers is estimated to be 2.2. If the price of personal computers declines by 20 percent, what will be the expected percentage increase in the quantity of computers sold?
The president of Tucker Motors says, Lowering the price wont sell a single additional Tucker car. The president believes that the price elasticity of demand is a. perfectly elastic. b. perfectly inelastic. c. unitary elastic. d. elastic.
What is the formula for line cross-price elasticity of demand?
Suppose Sally buys exactly five bars of English toffee each week, regardless of whether the toffee bars are regularly priced at 1 or on sale for 0.50. Based on this information, what is Sallys price elasticity of demand for English toffee in this price range? a. 0 b. 1 c. Infinity d. Cannot be determined.
Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?
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?
What are the major determinants of a products price elasticity of demand? Studies indicate that the demand for Florida oranges, Bayer aspirin, watermelons, and airfares to Europe are elastic. Why?