suppose that your demand schedule for compact discs as follows: price quantityde
ID: 1232785 • Letter: S
Question
suppose that your demand schedule for compact discs as follows: price quantitydemand quantity demand (income=$10000) (income=$12000) $8 40CDs 50CDsa 10 32 45 12 24 30 14 16 20 16 8 12 A) use the midpoint method to calculate your price elastcityof demand as the price of compact discs increases from $8 to $10 if(i)your income is $10000and (ii)your income is $12000 B)Calculate your income elasticity of demand as your incomeincreases from $10000 to $12000 if (i)the price is $12 and (ii)theprice is $16 suppose that your demand schedule for compact discs as follows: price quantitydemand quantity demand (income=$10000) (income=$12000) $8 40CDs 50CDsa 10 32 45 12 24 30 14 16 20 16 8 12 A) use the midpoint method to calculate your price elastcityof demand as the price of compact discs increases from $8 to $10 if(i)your income is $10000and (ii)your income is $12000 B)Calculate your income elasticity of demand as your incomeincreases from $10000 to $12000 if (i)the price is $12 and (ii)theprice is $16Explanation / Answer
A) Price elasticity of demand = (% change in quantity demanded) / (%change in price) i) (-8/40) / (2/8) = -0.8 ii) (-5/50) / (2/8) = -0.4 B) Income elasticity of demand = (% change in quantity demanded) / (%change in income) i) (6/24) / (2000/10000) = 1.25 ii) (4/8) / (2000/10000) = 2.5
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