Question

8. The cross-price elasticity for textbooks and copies of old exams is -3.5. If the price of copies of old exams increases by 10 percent, what will happen to the quantity demanded of textbooks? 9. Suppose you are the manager of a home-building company and the government is considering eliminating the tax deductibility of mortgage interest payments. A typical consumer's marginal tax rate is 25 percent, and the clasticity of demand for new homes is -1.5. Your boss wants to know the impact of the proposed government policy on your business. What would you advise him?

Answer 1

! С Chood price elasticity % change ei quantity of textbook is * change chenih prule of copies Lyrics bom! Bina 10 - 3.5 % change in quantity -3.5X10 = 4 change in quantity -35% en change en quantity $ there is fall by 35% o

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