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In: Economics

3. Refer to the accompanying graph. Price Quantity of I-phones (Income = 20,000) Quantity of I-phones...

3. Refer to the accompanying graph.

Price

Quantity of I-phones

(Income = 20,000)

Quantity of I-phones

(Income = 30,000)

$350

250

375

$450

200

325

$550

150

275

$650

100

225

$750

  50

175

  1. Suppose the price of an I-phone is $650, calculate the income elasticity of demand for I-phone?
  2. Is I-phone a normal good? Explain.
  3. Do you expect the cross-price elasticity between I-phones and android phones positive or negative? Explain.

4.

(a) Do you expect the supply curve of diamonds is steep or quite flat? Explain.

(b) With better technology of finding diamonds, how will the price elasticity of supply of diamonds change? Show your answers in a graph.

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3. Refer to the accompanying graph. Price Quantity of I-phones (Income = 20,000) Quantity of I-phones (Income = 30,000) $350 250 375 $450 200 325 $550 150 275 $650 100 225 $750   50 175 Suppose the price of an I-phone is $650, calculate the income elasticity of demand for I-phone? Is I-phone a normal good? Explain. Do you expect the cross-price elasticity between I-phones and android phones positive or negative? Explain.
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