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 20 per barrel to 30 per barrel and as a result, the demand per month for new cars changes from 650 to 300.

Part 1: The elasticity is


Part 2: These goods are (answer using numbers, 1-4)

B. As a result of a change in income from 1,475 to 2,975 per month, the consumption of good X changes from 340 to 425 units.


Part 3: The elasticity is



Part 4: Good X is a(an) (answer using numbers, 1-4)


C. As a result of a decrease in the price of good Y from 31 to 20 the demand for good X changes from 300 to 350 units.


Part 5: The elasticity is



Part 6: These goods are(answer using numbers, 1-4)


D. As a result of an economic boom in Calgary, the average income increases from 2,500 to 5,500 per month and as a result the demand for new houses increases from 150 to 360 units.


Part 7: The elasticity is



Part 8: New houses are a(an) (answer using numbers, 1-4)

Answer 1