In class exercises on Elasticity In the following table, columns 1 and 2 show yo
ID: 1124069 • Letter: I
Question
In class exercises on Elasticity In the following table, columns 1 and 2 show your demand schedule for apples imported from France and columns 4 and 5 show your demand for apples imported from China. Also columns 3 and 6 show your demand schedule for apples imported from France and from China when your income increased. Demand for apples imported from France (units per month) COLUMNS Demand for apples imported from China (units per month) COLUMNS PRICE PER QUANTITY QUANTITY PRICE PER QUANTITY QUANTITY UNITDEMANDED DEMANDED UNIT DEMANDED DEMANDED irhams (Dirhams) 12. 10 10 10 40 50 60 70 40 50 60 12 10 tlaticfdemand of French apples when the price of French apples increases from 6 to 7? What is the cross-price elasticity of demand of Chinese apples if the price of French apples increases from 10 to 11 and the price of Chinese apples is fixed at 6? GS 2. e, o What the income elasticity of demand when income increases from 100 to 150 and the price of French applies is fixed at 10? 3. 4. Is France or China apple is a normal good. Explain why?Explanation / Answer
1. The price rise from 6 to 7, means an increase in price of 17%. The decline in quantity is given by 14% from 70 to 60. Thus the price elasticity of demand is given by -14/17=-0.82.
2. The change in price is given by 10%.The change in quantity demanded of Chinese apples is give by 17%. Th cross price elasticity of demand is given by 17/10 = 1.7.
3. The change in income is given by 50%. The change in demand is given by 50%. The income elasticty of demand is given by 1.
4. In France apples is an inferior good as income rises quantity demanded is falling. Thus apple is an inferior good. In case of China, apples are a normal good as income rises quantity demanded increases.
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