Suppose the income elasticity of demand for food is 0.50 and the price elasticity of demand is – 1.50. Suppose also that Felicia spends $10,000 a year on food, the price of food is $2, and that her income is $25,000. 14000- 12000- If a sales tax on food caused the price of food to increase to S2.50, what would happen to her consumption of food? Because a large price change is involved, use the arc elasticity to measure the price elasticity of demand rather than a point elasticity. 10000- 8000- C1 Felicia's consumption of food would decrease by units. (Enter your response rounded to two decimal places.) 6000- 4000- 2000- L1 2000 4000 6000 8000 10000 12000 1400 Food Other Consumption

Suppose the income elasticity of demand for food is 0.50 and the price elasticity of demand is – 1.50. Suppose also that Felicia spends $10,000 a year on food, the price of food is $2, and that her income is $25,000. 14000- 12000- If a sales tax on food caused the price of food to increase to S2.50, what would happen to her consumption of food? Because a large price change is involved, use the arc elasticity to measure the price elasticity of demand rather than a point elasticity. 10000- 8000- C1 Felicia's consumption of food would decrease by units. (Enter your response rounded to two decimal places.) 6000- 4000- 2000- L1 2000 4000 6000 8000 10000 12000 1400 Food Other Consumption

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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