elast3a - (c) The income elasticity of demand for Caribbean...

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1 Additional Problem 3 : Elasticity (Answer Key) State the sign (positive or negative), and the range (less than 1, 1, greater than 1) of the following elasticities. Offer a brief verbal explanation for each elasticity case. (a) The elasticity of demand for ice cream at the point of maximum revenue or expenditure. Sign = - for demand | E P | = 1 At point of maximum TR, |E P | is unit elastic. (b) The cross elasticity of demand for ice cream with respect to the price of frozen yogurt. Sign = + for substitutes | E XY | >
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Unformatted text preview: (c) The income elasticity of demand for Caribbean cruises. Sign = + for superior / normal |E I | > 1 Elastic, not necessities, substitution available. (d) The elasticity of supply of gasoline. Sign = + for supply |E P | < 1 Inelastic, necessity, few substitutes. (e) The cross elasticity of demand for corn ready to be popped with respect to the price of popcorn machines. Sign = - for complements |E X,Y | > 1 Elastic, not necessities, substitutions available....
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This note was uploaded on 10/26/2009 for the course ECON 180-004-20 taught by Professor Bresnock during the Fall '09 term at UCLA.

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