The accompanying table shows the price and yearly quantity sold of souvenir T-shirts in the town of Crystal Lake according to the average income of the tourists visiting.Price of T-ShirtsQuantity of T-Shirts demanded when the average tourist income is $20,000Quantity of T-shirts demanded when the average tourist income is $30,000$4$30005000$5$24004200$6$16003000$7$80018001. Using the midpoint method, calculate the price elasticity of demand when the price of a T-shirt rises from $5 to $6 and the average tourist income is $20,000. Also calculate it when the average tourist income is $30,000.2. Using the midpoint method, calculate the income elasticity of demand when the price of a T-shirt is $4 and the average tourist income increases from $20,000 to $30,000. Also calculate it when the price is $7.

Price elasticity of demand: - Price elasticity of demand measures the responsiveness of change in…

Answered: The accompanying table shows the price…

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter23: Price-searcher Markets With Low Entry Barriers

Section: Chapter Questions

Problem 3CQ

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The accompanying table shows the price and yearly quantity sold of souvenir T-shirts in the town of Crystal Lake according to the average income of the tourists visiting.

Price of T-Shirts	Quantity of T-Shirts demanded when the average tourist income is $20,000	Quantity of T-shirts demanded when the average tourist income is $30,000
$4	$3000	5000
$5	$2400	4200
$6	$1600	3000
$7	$800	1800

1. Using the midpoint method, calculate the price elasticity of demand when the price of a T-shirt rises from $5 to $6 and the average tourist income is $20,000. Also calculate it when the average tourist income is $30,000.

2. Using the midpoint method, calculate the income elasticity of demand when the price of a T-shirt is $4 and the average tourist income increases from $20,000 to $30,000. Also calculate it when the price is $7.

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