Econ 1110 HW#3 Solution Q5 (1,000,000800,000)1,000,0000.5100QQePPPΔ−= −==ΔΔSo =-40. So the price will increase by 40 dollars PΔQ6 Income elasticity of demand=IIQQΔΔ=(-1%)/3%=-0.33 The good is inferior. The total revenue will decrease since both equilibrium price and quantity will decrease. Q7 105%PepsiPepsiPepsiPepsiCokeCokeQQQQePPΔΔ= −==Δ%50−=ΔPepsiPepsiQQ.So the demand for Pepsi will decrease by 50% 1
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