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. If a sales tax on food caused the price of food to increase to $2.50, 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. Felicia's consumption of food would decrease by 1428.57 units. (Enter your response rounded to two decimal places.) Suppose that Felicia gets a tax rebate of $2,500 to ease the effect of the sales tax. What would her consumption of food be now? (Again, use an arc income elasticity to answer this question instead of a point income elasticity.) Felicia's consumption of food would now be decimal places.) units. (Enter your response rounded to two
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. If a sales tax on food caused the price of food to increase to $2.50, 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. Felicia's consumption of food would decrease by 1428.57 units. (Enter your response rounded to two decimal places.) Suppose that Felicia gets a tax rebate of $2,500 to ease the effect of the sales tax. What would her consumption of food be now? (Again, use an arc income elasticity to answer this question instead of a point income elasticity.) Felicia's consumption of food would now be decimal places.) units. (Enter your response rounded to two
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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PLEASE ANSWER THE SECOND BLANK!!!! THANK YOU
![14000-
12000-
10000-
8000-C,
6000-
4000-
2000-
F1
L1
of
2000 4000 6000 8000 10000 12000 14000
Food
Other Consumption](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa796c0ea-45aa-4a05-a8c7-22112e4e5350%2F7ff10ca5-0a66-44e7-9575-3a656559b37f%2F0sy2c3t_processed.jpeg&w=3840&q=75)
Transcribed Image Text:14000-
12000-
10000-
8000-C,
6000-
4000-
2000-
F1
L1
of
2000 4000 6000 8000 10000 12000 14000
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.
If a sales tax on food caused the price of food to increase to $2.50, 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.
Felicia's consumption of food would decrease by 1428.57 units. (Enter your response rounded
to two decimal places.)
Suppose that Felicia gets a tax rebate of $2,500 to ease the effect of the sales tax. What would
her consumption of food be now? (Again, use an arc income elasticity to answer this question
instead of a point income elasticity.)
Felicia's consumption of food would now
decimal places.)
units. (Enter your response rounded to two](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa796c0ea-45aa-4a05-a8c7-22112e4e5350%2F7ff10ca5-0a66-44e7-9575-3a656559b37f%2F6z6mmjj_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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.
If a sales tax on food caused the price of food to increase to $2.50, 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.
Felicia's consumption of food would decrease by 1428.57 units. (Enter your response rounded
to two decimal places.)
Suppose that Felicia gets a tax rebate of $2,500 to ease the effect of the sales tax. What would
her consumption of food be now? (Again, use an arc income elasticity to answer this question
instead of a point income elasticity.)
Felicia's consumption of food would now
decimal places.)
units. (Enter your response rounded to two
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