36 margarine 020 necessities lively arts theater

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Unformatted text preview: $4 0 1. At any price above $4, quantity demanded is zero D 2. At exactly $4, consumers Q will buy any quantity Some of Price Elasticity of Demand PRODUCT PRICE ELASTICITY INELASTIC Water 0.14 Food 0.21 Lively arts (theater,etc.) (0.07,0.29) Cigarettes (0.3,0.4) Legal services 0.50 Stationery 0.57 Jewelry, Watches 0.67 (0.8-1.20) APPROXIMATELY UNIT-ELASTIC Beer 1.13 Electricity 1.14 Mass transit, Bus 1.20 New cars 1.20 ELASTIC Charitable giving 1.29 Marijuana 1.50 Air travel 2.40 Toilet articles 3.04 Motion pictures 3.70 2.5.2 Other Demand Elasticities 2.5.2 Income Elasticity of Demand a measure of how much the quantity demanded of a good responds to a change in consumers’ income. Income elasticity of demand= Percentage change in quantity demanded Percentage change in income ∆Q / Q Ei = ∆I / I Q (a) Ei < 1 (b) 0 < Ei < 1 Q (c) Ei < 1, Ei < 0 I I Q normal goods: Ei>0 luxury: Ei>1 necessity: 0 > Ei > 1 inferior goods: Ei > 0 m I Some of Income Elasticity of Demand PRODUCT INCOME ELASTICITY INFERIOR Flour -0.36 Margarine -0.20 NECESSITIES Lively arts (theater, etc.) (0.06,0.26) Electricity (0.07,0.74) Physicians 0.75 APPROXIMATELY UNIT-ELASTIC Liquors 1.00 Tobacco 1.02 Clothing 1.02 LUXURIES Books 1.44 New cars 2.45 Private Education 2.46 Durable Goods (appliances, etc.) 2.90 •Cross-Price Elasticity of Demand Cross­price elasticity of demand...
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