Question

Please help with these questions:

Question 23 0.2 pts Refer to the accompanying table to answer the following questions. Price of Quantity Demanded Quantity Demanded Erasers of Erasers of Pencils $.50 10 $1.008 1.50 7 $2.006 $2.505 12 10 The price of erasers increases from $0.50 to $1.00 per eraser. Using the midpoint method, what is the cross-price elasticity of demand between pencils and erasers? 7.67 O 0.13 7.67 -0.13 Question 24 0.2 pts What good is most likely to have an income elasticity of demand equal to 0.3? O takeout dinner medication O used clothing a download on iTunes O laptop

Answer 1

25.

Answer: 5^th option

Cross PE of demand = [(Q2 – Q1) / {(Q1 + Q2) / 2}] / [(P2 – P1) / {(P1 + P2) / 2}]

                                    = [(11 – 12) / {(12 + 11) / 2}] / [(1 – 0.5) / {(0.5 + 1) / 2}]

                                    = (-1 / 11.5) / (0.5 / 0.75)

                                    = - {0.75 / (11.5 × 0.5)}

                                    = - (0.75 / 5.75)

                                    = - 0.13

26.

Answer: 3^rd option

The income elasticity is 0.3. Since it is less than 1, it is inelastic. It means increasing income decreases the quantity demanded, which happens in inferior goods like used clothing. If people’s income increase, they should not use used-cloth but should purchase brand new cloths.

27.

Answer: 4^th option

This is unitary elastic, since (PE = 1) by ignoring the negative sign.

PE = Percentage change in quantity demanded / Percentage change in price

     = -30% / 30%

      = -1