Answered: The price of a good increased from AED…

The price of a good increased from AED 5000 to AED 7000 and accordingly the quantity sales of that good decreased from 22,000 units to 20,000 units.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The price of a good increased from AED 5000 to AED 7000 and accordingly the quantity sales of that good decreased from 22,000 units to 20,000 units. Calculate the PED, using the mid-point formula.

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(a) You went to the market to buy groceries. You noticed that the price of the tea increased in the market from April to September. Now that you have a knack for elasticity, you wanted to check something. You asked the customers assistant of the store for some information. The information you collected is mentioned below. Information of Tea Market: Price Quantity April 12 14 September 18 10 Information of Coffee Market: Quantity April 12 September 18 Out of curiosity, you wanted to see the effect of change in price of tea on the quantity demanded for coffee. What would be the cross price elasticity of demand due to the price increase of tea? Do not convert into percentage. Give your answer in 2 decimal places. E.g. If you get XED = 0.253 then submit 0.25 (b) Based on the findings in 6(a), you can comment on the relationship of tea and coffee Tea and coffee are - One word answer (complementary/substitute/neutral) goods
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