Question

-Please describe your own personal price elasticity of demand for a normal good that you consume for recreation or pleasure. Please use a specific example of how the price of that good has changed (in $'s and/or %), and your response to that change (in $'s and/or quantity). Based on these numbers, describe the value of your price elasticity of demand for that good. -Please give one example of complementary goods, as well an example of substitute goods, from the perspective of a restaurant owner (any food type is ok!). Describe how the business owner will make his decisions on how much of both goods to purchase if the price of one of the goods increases or decreases. Please answer 2 question at least 450 words, and give references.

Answer 1

Let the consumed normal good for recreation be "No. of cinema tickets purchased in a month"

This is a normal good because if my income increases, I would like to visit cinema hall and watch movies more often.

To take specific example,

Suppose that a price of movie ticket is $9. And correspondingly I visit cinemas 3 times a month.

Now, suppose that price of movies increase to $12 and so I limit my frequency to watch movies to 2 times a month.

Thus, price elasticity of movie tickets

For a perspective of restaurant owner, bread and butter are complementary food items since they are usually consumed together while tea and coffee are substitute products since both goods are usually never consumed together.

If the price of bread increases, owner will purchase less bread and even less butter since they usually go together and surplus butter would be wasted if less bread is available.

If the price of tea increases, owner will purchase more of coffee since he knows that these are substitutes and now more consumers will be willing to substitute coffee for tea.