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Lorena likes to play golf.

Lorena likes to play golf. The number of times per year that she plays depends on both the price of playing a round of golf as well as Lorena’s income and the cost of other types of entertainment—in particular, how much it costs to go see a movie instead of playing golf.

The three demand schedules in the table below show how many rounds of golf per year Lorena will demand at each price under three different scenarios. In scenario D1, Lorena’s income is $50,000 per year and movies cost $9 each. In scenario D2, Lorena’s income is also $50,000 per year, but the price of seeing a movie rises to $11. And in scenario D3, Lorena’s income goes up to $70,000 per year, while movies cost $11.

Scenario: D1 D2 D3
Income per year: $50,000 $50,000 $70,000
Movie Ticket Price: $9 $11 $11
Rounds of Golf: Quantity Demanded Quantity Demanded Quantity Demanded
Price = $50 15 10 15
Price = $35 25 15 30
Price = $20 40 20 50

a. Using the data under D1 and D2, calculate the cross elasticity of Lorena’s demand for golf at all three prices. (To do this, apply the midpoints approach to the cross elasticity of demand.)

Instructions: Round your answer to two decimal places. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers.
Cross elasticity of Lorena’s demand at the price of $50

This question was asked on Jan 20, 2013.

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