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HW_3_solution_Q5_Q10

HW_3_solution_Q5_Q10 - Econ 1110 HW#3 Solution Q5 Q e = 0.5...

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Econ 1110 HW#3 Solution Q5 (1,000,000 800,000) 1,000,000 0.5 100 Q Q e P P P Δ = − = = Δ Δ So =-40. So the price will increase by 40 dollars P Δ Q6 Income elasticity of demand= I I Q Q Δ Δ =(-1%)/3%=-0.33 The good is inferior. The total revenue will decrease since both equilibrium price and quantity will decrease. Q7 10 5% Pepsi Pepsi Pepsi Pepsi Coke Coke Q Q Q Q e P P Δ Δ = − = = Δ % 50 = Δ Pepsi Pepsi Q Q .So the demand for Pepsi will decrease by 50% 1
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