Suppose a Cobb-Douglas function of two goods. The elasticity of demand for good 1is -0.3. From this information we know that:Good 1 is a luxury goodTwo answers are correctGood 1 is an inferior goodThe cross-price elasticity of demand for good 2 must be greater than |0.71The income elasticity of good 1 is 0.3No answer is correctThe elasticity of demand for good 2 must be greater than 10.71

Price elastictity of demand tells how much responsive the quantity demanded is towards the changes…

Suppose a Cobb-Douglas function of two goods. The elasticity of demand for good 1 is -0.3. From this information we know that: OGood 1 is a luxury good O Two answers are correct O Good 1 is an inferior good O The cross-price elasticity of demand for good 2 must be greater than J0.71 O The income elasticity of good 1 is 0.3 ONo answer is correct The elasticity of demand for good 2 must be greater than 10.71

Suppose a Cobb-Douglas function of two goods. The elasticity of demand for good 1 is -0.3. From this information we know that: OGood 1 is a luxury good O Two answers are correct O Good 1 is an inferior good O The cross-price elasticity of demand for good 2 must be greater than J0.71 O The income elasticity of good 1 is 0.3 ONo answer is correct The elasticity of demand for good 2 must be greater than 10.71

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 15CTQ: Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the...

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(Other Elasticity Measures) Complete each of the following sentences: a. The income elasticity of demand measures, for a given price, the __________ in quantity demanded divided by the __________ income from which it resulted. b. If a decrease in the price of one good causes a decrease in demand for another good, the two goods are __________. c. If the value of the cross-price elasticity of demand between two goods is approximately zero, they are considered __________.
What does a price elasticity of demand of 0.39 mean?
Economists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?
The equation for a demand curve is P=483Q. What is the elasticity in moving from quantity of 5 to a quantity of 6?
The avenge annual income rises from 25,000 to 33,000, and the quantity of bleed consumed in a year by the avenge person falls from 30 loaves to 22 loaves. What is the income elasticity of bread consumption? Is bread a normal or an inferior good?
The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?
Why is the demand curve with constant unitary elasticity concave?