A 3 percent rise in the price of orange juice decreases the quantity of orange juice...

A 3 percent rise in the price of orange juice decreases the quantity of orange juice demanded by 9percent and increases the quantity of apple juice demanded by 15 percent.

Calculate the price elasticity of demand for orange juice and the cross elasticity of demand for apple juice with respect to the price of orange juice.

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When Judy's income increased from $130 to $170 a week, she increased her demand for concert tickets by 5 percent and decreased her demand for bus rides by 15 percent. Calculate Judy's income elasticity of demand for concert tickets and bus rides.

Expert Solution

Q1. Price ealsticity of demand for Orange Juice= Percentage change in demand of orange juice / percentage change in price of orange juice = - 9% / 3% = - 3.00

Cross Elasticity of demand for apple juice= Percentage change in demand for Apple juice / Percentage change in price for organge juice = +15% / 3% = +5.00

Q2. Percentage change in income = Change in Income / Average income *100 = (170-130) / (170+130)/2 = 26.67%

Note: Prcentage change in income is computed using Midvalue method.

Income elasticity of demand for concert ticket= Percentage chnage in demand of concert ticket / Percentage change in income = + 5% /26.67 % = + 0.187

Income elasticity of demand for Bus rides= Percentage chnage in demand of bus rides / Percentage change in income = -15% / 26.67 % = - 0.562

Rahul Sunny answered 1 year ago

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