Qd = 1,000 +.5I -400P, + 200P,, where P. is the price of a pair of cashmere socks Pw is the price of a pair of wool socks Let I = $20,000, P. = $10, and P, $5. At current prices, what is the own-price elasticity of demand for cashmere socks? а. Is demand elastic or inelastic? b. At current prices, what is the cross-price elasticity of demand for cashmere and wool socks? Are they substitutes or compliments? с. At current prices, what is the income elasticity for cashmere socks? Are cashmere
Qd = 1,000 +.5I -400P, + 200P,, where P. is the price of a pair of cashmere socks Pw is the price of a pair of wool socks Let I = $20,000, P. = $10, and P, $5. At current prices, what is the own-price elasticity of demand for cashmere socks? а. Is demand elastic or inelastic? b. At current prices, what is the cross-price elasticity of demand for cashmere and wool socks? Are they substitutes or compliments? с. At current prices, what is the income elasticity for cashmere socks? Are cashmere
Chapter1: Making Economics Decisions
Section: Chapter Questions
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![4. The market demand for cashmere socks is given by:
\[ Q^d = 1,000 + 0.5I - 400P_c + 200P_w \]
where:
- \( P_c \) is the price of a pair of cashmere socks
- \( P_w \) is the price of a pair of wool socks
Let \( I = \$20,000 \), \( P_c = \$10 \), and \( P_w = \$5 \).
a. At current prices, what is the own-price elasticity of demand for cashmere socks? Is demand elastic or inelastic?
b. At current prices, what is the cross-price elasticity of demand for cashmere and wool socks? Are they substitutes or complements?
c. At current prices, what is the income elasticity for cashmere socks? Are cashmere socks normal or inferior goods?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9d9e168a-9464-4c08-8d6d-0c3b079a04ec%2F866046b4-9133-4573-9eed-5bf39ac896c3%2Fecd614_processed.png&w=3840&q=75)
Transcribed Image Text:4. The market demand for cashmere socks is given by:
\[ Q^d = 1,000 + 0.5I - 400P_c + 200P_w \]
where:
- \( P_c \) is the price of a pair of cashmere socks
- \( P_w \) is the price of a pair of wool socks
Let \( I = \$20,000 \), \( P_c = \$10 \), and \( P_w = \$5 \).
a. At current prices, what is the own-price elasticity of demand for cashmere socks? Is demand elastic or inelastic?
b. At current prices, what is the cross-price elasticity of demand for cashmere and wool socks? Are they substitutes or complements?
c. At current prices, what is the income elasticity for cashmere socks? Are cashmere socks normal or inferior goods?
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