HO_03_201_Sp03 - increase in the quantity demanded of good...

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Cal Poly Pomona, EC 201 Principles of Microeconomics – Professor Brown Handout # 3 1) Use the above graph to calculate price elasticity of demand . (use the numbers provided – note that they do not necessarily correspond to the distances on the graph) a) between points A and C b) between points B and D c) For which segment is demand more elastic (or “less inelastic”), BD or AC? 2) a) What is the income elasticity of demand for good Z if a 10% increase in income causes a 5%
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Unformatted text preview: increase in the quantity demanded of good Z at a constant P Z ? b) Is good Z a normal good or inferior good ? 3) a) What is the cross-price elasticity of demand for good X if a 10% decrease in price of good Y, (P Y ↓) causes a 5% increase in the quantity demanded of good X (Q X ↑) at a constant price of X, P X ? b) Are goods X and Y substitutes or complements ? Quantity of X Price per unit of X Demand 70 90 80 120 A B C D Demand- new 100...
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