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In: Economics

The demand for Apples (Qa) is given by Qa = 100 - 1Pa + .5Pb -...

  1. The demand for Apples (Qa) is given by Qa = 100 - 1Pa + .5Pb - 0.01I, where Pa is the price of Apples, Pb is the price of Bananas, and I is the income.
    1. Calculate the price elasticity demand for Apples when Pa is between 2 and 3, Pb = 1, and I = 500. Is the demand for Apples elastic, unit-elastic, or inelastic?
    2. Calculate the cross-price elasticity demand for Apples when Pb is between 1 and 2, Pa = 2, and I = 500. Are Apples and Bananas substitutes or complement goods?
    3. Calculate the income elasticity demand for Apples when I is between 500 and 1,000, Pa = 2, and Pb = 1. Are Apples normal or inferior goods?

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Rahul Sunny answered 2 years ago
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