Question

From the demand schedule in the table below for smart phones calculate the price elasticity of demand between the following points. Use the midpoint formula for price elasticity of demand. Hint: the PED is always reported as a positive number. 1.Point B to point C 2. Point D to point E 3. Point G to point H Point Price A60 B 70 80 90 100 Quantity Demanded 3,000 2,800 2,600 2.400 2,200 2,000 1,800 1,600 120 130 The price of Disneyland tickets increases from $85 to $99 and this causes an increase in quantity of Sea World tickets sold from 20,000 to 28,000. 4. What is the cross-price elasticity of demand of Sea World tickets? 5. Are these services compliments or substitutes?

Answer 1

Initial Prices Inilial quantiy Price Elastically . (-) change in change manage they x quantity og Demand (PED) - change in price 1. Point B to C demanded PEDIT = (-) 70 2500 2600 OX 2800 80-70 Btc 28-6-X 70 2800 = (-0.25 =(-) - 00.25 2. Point Dt E PERO 100-go puno 2400 - 2200 PEOPLE PED -(-) 2400 - 2200 100 - 90 472400-2200 x DUE 2400 30d x 249 10 84 = (-) -(-)-75 x 120 3. Point G to H PEDGEH = (-) 1800-1600 130 - 120 - (- 200 1800 +24 X63 = (-) 4/5 (-) 133

24. When price of Disneyland tickets increase from $85 to $99, Quantity sold of sea world ticket increases from 20,000 to 28,ovo Date_ Cross-Price Elasticity a 307 Demand = of Sea World - tickets Change m ang Q.D of security led buladzie ord ticket Change in Pof Disneyland goeie 28000 - 20000 x 95 Initial 8.0 of Sea world ticket 28000 - 20000 25 t ... 17 99-85 20000 17 2.428 147 2000o 8 5 These goods are substitute goods because an. in crease in price of one lead to an increase in demand for another.