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Unformatted text preview: Suppose that: Py1 = $1.00 and Qx1 = 100 Py2 = $1.50 and Qx = Demand (3) Calculation of Cross Price Elasticity2of 120
Suppose that: of Cross $1.00Elasticity of= 100 Calculation Py1 = Price and Qx1 Demand Suppose that: y2 = $1.50 and Qx 100 120= $1.50 and P Py1 = $1.00 and Qx1 = 2 = Py2 16 When there are “big” percentage changes in prices and quantities, one can calculate in arc crossprice elasticity of When there are “big” percentage changes anprices and quantities, one can cdemand: arc crossprice elasticity of demand: alculate an 19
When there are “big” percentage changes in prices and quantities, one can calculate an arc crossprice elasticity of demand: CrossPrice Elasticity of Demand The crossprice elasticity of demand is
CrossPrice Elasticity of Demand The crossprice elasticity of demand is Suppose that Qx= 6  1 Px + 2 Py + .002 M, where Px = $1 and M = $2000. What is the income elasticity of demand when Py = $2? Suppose that Q Px $1 Py x + 2 Py = .002 in where Px = $1 Answer: Substituting x ==6 , 1 P= $2 and M + $2,000M,the demand equation andgives= $2000. What is the income elasticity of demand when Py M Qx = 14. From the definition above, = $2? Answer: Substituting Px = $1, Py = $2 and M = $2,000 in the demand equation gives Qx = 14. From the definition above, . = $2? Answer: Substituting Px = $1, Py = $2 and M = $2,000 in the demand equation gives Qx = 14. From the definition above, . Note that , so . © Bryan L. Boulier, 2010. All rights reserved. ...
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This note was uploaded on 02/17/2011 for the course ECON 101 taught by Professor Fon during the Spring '06 term at GWU.
 Spring '06
 FON
 Microeconomics, Price Elasticity

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