Just need to find the income elasticity of demand for lobsters, is demand for lobsters relative to $ of shrimp elastic, inelastic, unit elastic, and is shrimp good substitute for lobsters based on cross elasticity*** ty :)
Just need to find the income elasticity of demand for lobsters, is demand for lobsters relative to $ of shrimp elastic, inelastic, unit elastic, and is shrimp good substitute for lobsters based on cross elasticity*** ty :)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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100%
***Just need to find the income
Transcribed Image Text:The demand for lobster is represented as follows, where Qis measured in pounds of lobster:
Q, =100 – 75P+91P, – 80P. +25Y
where P is the price per pound of lobster, Ps is the price per pound of shrimp, Pc is the
price per dozen of corn ears, and Y is income, measured as the median hourly wage of
consumers. Suppose that the price of a pound of shrimp is $10, the price of corn is $5 per
dozen, and the median hourly wage for customers in this market is $25. Further, suppose
that the current equilibrium price for lobster is $13 per pound. Find the equilibrium
quantity demanded of lobster in this market. Now determine the following elasticities:
price elasticity of demand for lobster; cross-elasticity of demand for lobster relative to
shrimp; and income elasticity of demand for lobsters. Is demand for lobsters (relative to
the price of shrimp) elastic, inelastic, or unit elastic? Based on the cross-elasticity of
demand for shrimp you found, is shrimp a reasonably good substitute for lobsters in this
market? Briefly explain your answer.
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