Calculate the cross-price elasticity

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Reference no: EM13151570

The demand for good X shifts due to a change in income (Panel A) and a change in the price of a related good Y (Panel B). Holding the price of good X constant at $50, calculate the following elasticity’s:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

a. Panel A shows how the demand for X shifts when income increases from $30,000 to $34,000. Use the information in Panel A to calculate the income elasticity of demand for X. Is good X normal or inferior?

b. Panel B shows how the demand for X shifts when the price of related good Y increases from $60 to $68. Use the information in Panel B to calculate the cross-price elasticity. Are goods X and Y substitutes or complements?

Reference no: EM13151570

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