(Solved): 7. Using the formula for the cross price elasticity for a good: the % change in quantity de ...

7. Using the formula for the cross price elasticity for a good: the $\%$ change in quantity demanded for good $\mathrm{X}/$ the $\%$ change in the price of good $\mathrm{Y}$. If the $\%$ change in quantity demanded is 7 for good $X$ and the $\%$ change in the price of good $Y$ is 4 . Calculate the cross elasticity of demand. Next state if the 2 goods are substitutes or complement goods. 8. Using the formula for price elasticity of supply: the $\%$ change in quantity supplied / the $\%$ change in the price Q2 -Q1/ Q1 ( this is the \% change in quantity supplied in the numerator) / P2 $\mathrm{P}1/\mathrm{P}1$ ( this is the \% change in price in the denominator) PRICE SUPPLIED $\$9$ (original price $\mathrm{P}1$ ) quantity supply Q1) $\$10$ ( new price $\mathrm{P}2$ ) quantity supplied Q2) QUANTITY 75 ( original 100 (new Using the formula calculate the price elasticity of supply when the firm increases the price from $\$9$ to $\$10$. (Take your calculations to the nearest tenth, 1 decimal point.) Take final answer is a to the nearest tenth, 1 decimal point.) State if the good is elastic or inelastic. 1. Given the price elasticity of demand in each of the following examples state if the good is elastic, inelastic or unitary elastic. a. the price elasticity is -.87 b. the price elasticity is -2.5 2. Give a downward sloping demand curve state in each of the following if the consumer is elastic, inelastic or unitary elastic. a. at higher prices on the consumers demand curve b. at lower prices on the demand curve 3. State in each of the following is the good would be elastic or inelastic. a. the good takes up a larger portion of the consumers budget b. there are few substitutes for the good 4. In each of the following state if the demand curve is elastic or inelastic. a. the demand curve is a horizontal line b. the demand curve is a vertical line 5. Using the formula for point elasticity of demand: $\%$ change in quantity / $\%$ change in price Q2 - Q1/ Q1 ( this is the \% change in quantity in the numerator) Q1 is the original quantity demanded $\mathrm{Q}2$ is the new quantity demanded $\mathrm{P}2$ - $\mathrm{P}1$ / $\mathrm{P}1$ ( this is\% change in price in the denominator) $\mathrm{P}1$ is the original price $\mathrm{P}2$ new price PRICE $\$7$ (original price $\mathrm{P}1$ ) $\$6$ ( new price $\mathrm{P}2$ ) QUANTITY DEMANDED 40 (original quantity demanded Q1) 55 ( new quantity demanded Q2) Using the formula for point elasticity of demand calculate the price elasticity of demand when the price decreases from $\$7$ to $\$6$. (Take your calculations to the nearest hundredth, 2 decimal points.) State if the good is elastic or inelastic. 6. State in each of the following if the the good would be a luxury good, inferior good or normal good. a. if the income elasticity is negative for a good; example -.8 b. if the income elasticity is positive for a good; example 4