Economics 1021A/B Lecture Notes - Lecture 13: Inferior Good, Substitute Good, Demand Curve
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Suppose that business travelers and vacationers have the following demand for airline tickets
Price Qty. Demanded (business travelers) Qty. Demanded (vacationers)
price | Tickets Demanded (business travelers) | Tickets Demanded (Vacation travelers) |
150 | 2100 | 1000 |
200 | 2000 | 800 |
250 | 1900 | 600 |
300 | 1800 | 400 |
1A. As the price of tickets rises from $200 to $250, what is the price elasticity of demand for Business Travelers. Is demand elastic or inelastic? Show your work
Illustrate the demand curves on the graph.
1B. As the price of tickets rises from $200 to $250, what is the price elasticity of demand for Vacationers. Is demand elastic or inelastic? Show your work!
1C. Why might vacationers have a different elasticity than business travelers?
Suppose that your demand schedule for compact disks is as follows:
price | quantity of demanded if income = 10,000 | quantity of demanded if income = 12,000 |
8 | 40 | 50 |
10 | 32 | 40 |
12 | 24 | 30 |
14 | 16 | 20 |
16 | 8 | 12 |
2A. What is the numerical income elasticity of demand as your income increases from $10,000 to $12,000 if the price of the CDs is $12*. Is this product a normal good or an inferior good based on your calculation? Show your work!
2B. What is the numerical income elasticity of demand as your income increases from $10,000 to $12,000 if the price of the CDs is $16*. Is this product a normal good or an inferior good based on your calculation? Show your work!