Question

Calculate the elasticity for the following questions (USING THE MIDPOINT (AVERAGE) FORMULA) and indicate if the goods are: 1. Inferior, 2. Normal, 3. Complements, or 4. Substitutes (Please Include The Negative signs in your answers where appropriate) A. The price of gasoline increases from 12 per barrel to 28 per barrel and as a result, the demand per month for new cars changes from 600 to 200. Part 1: The elasticity is -0.5 Part 2: These goods are (answer using numbers, 1-4) 3 B. As a result of a change in income from 1,275 to 1,875 per month, the consumption of good X changes from 380 to 200 units. Part 3: The elasticity is -1.0065 Part 4: Good X is a(an) (answer using numbers, 1-4) 1 C. As a result of a decrease in the price of good Y from 39 to 19 the demand for good X changes from 150 to 350 units. Part 5: The elasticity is -2.6 Part 6: These goods are(answer using numbers, 1-4) 3 D. As a result of an economic boom in Calgary, the average income increases from 2,800 to 4,200 per month and as a result the demand for new houses increases from 160 to 260 units. Part 7: The elasticity is 1.25 Part 8: Newm, houses are a(an) (answer using numbers, 1-4) 2

Answer 1

The answers are given below: