Question 5: [5] Read the following scenario and answer the succeeding questions. Scenario 4: Suppose the average income of a consumer named Warren decrease from R18000 to R12000. As a result, the quantity of product A demanded by Warren increase from 200 units to 280 units. For scenario 4, answer the following questions: 5.1 Use the ARC (midpoint) formula to calculate the income elasticity of demand for product A given the information above. (3) 5.2 Based on your answer in 5.1, is product A an inferior good or a normal good? Substantiate your answer with reference to your calculated elasticity value.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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9 21 BBM_MI22 APF X
Recordings - Onel x
Calendar - Armstro X
Mail - Armstrong, X
Topic: Economic E X
Recordings - Onel x
Price Elasticity of C X +
structure.com/courses/967/assignments/14531
4.2 Based on your answer in 4.1., illustrate and explain the elasticity of demand in the market for high blood pressure medication. Clearly indicate the correct
percentage changes in price and quantity on the elasticity graph. (3)
4.3 Explain how Beta-Blockers can increase total revenue (TR).
Question 5: [5]
Read the following scenario and answer the succeeding questions.
Scenario 4:
Suppose the average income of a consumer named Warren decrease from R18000 to R12000. As a result, the quantity of product A demanded by Warren increase
from 200 units to 280 units.
For scenario 4, answer the following questions:
5.1 Use the ARC (midpoint) formula to calculate the income elasticity of demand for product A given the information above. (3)
5.2 Based on your answer in 5.1, is product A an inferior good or a normal good? Substantiate your answer with reference to your calculated elasticity value.
SECTION D
Question 6: [10]
Read the following scenario and answer the questions that follow.
Scenario 5:
A consumer named Larissa receives a daily income of R180. Larissa consumes only two products, coffee, and lasagne. The price of coffee is R20 per cup, and the price
of lasagne is R30 per portion. According to Larissa, it does not matter whether she gets one portion of lasagne and ten cups of coffee per day or two portions of
lasagne and six cups of coffee. These two combinations provide her with the same amount of satisfaction; she is indifferent between them.
Larissa also indicates some other combinations of coffee and lasagne that will yield the same level of satisfaction or total utility as the previous two.
Transcribed Image Text:9 21 BBM_MI22 APF X Recordings - Onel x Calendar - Armstro X Mail - Armstrong, X Topic: Economic E X Recordings - Onel x Price Elasticity of C X + structure.com/courses/967/assignments/14531 4.2 Based on your answer in 4.1., illustrate and explain the elasticity of demand in the market for high blood pressure medication. Clearly indicate the correct percentage changes in price and quantity on the elasticity graph. (3) 4.3 Explain how Beta-Blockers can increase total revenue (TR). Question 5: [5] Read the following scenario and answer the succeeding questions. Scenario 4: Suppose the average income of a consumer named Warren decrease from R18000 to R12000. As a result, the quantity of product A demanded by Warren increase from 200 units to 280 units. For scenario 4, answer the following questions: 5.1 Use the ARC (midpoint) formula to calculate the income elasticity of demand for product A given the information above. (3) 5.2 Based on your answer in 5.1, is product A an inferior good or a normal good? Substantiate your answer with reference to your calculated elasticity value. SECTION D Question 6: [10] Read the following scenario and answer the questions that follow. Scenario 5: A consumer named Larissa receives a daily income of R180. Larissa consumes only two products, coffee, and lasagne. The price of coffee is R20 per cup, and the price of lasagne is R30 per portion. According to Larissa, it does not matter whether she gets one portion of lasagne and ten cups of coffee per day or two portions of lasagne and six cups of coffee. These two combinations provide her with the same amount of satisfaction; she is indifferent between them. Larissa also indicates some other combinations of coffee and lasagne that will yield the same level of satisfaction or total utility as the previous two.
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