Judy's Marshallian demand for oranges is [0.7 2p0.3p0.4 where Pa is the price of apples, po is the price of oranges, and I is Judy's income. Suppose I = 100, Pa = = 2, and po = 1. a) Find and interpret the income elasticity for the demand for oranges. Are oranges an 1 inferior or normal good? b) Find the own price elasticity of demand for oranges. Discuss how the price elasticity varies with po c) Find the cross price elasticity for oranges. Are oranges and apples gross substitutes or gross complements?
Judy's Marshallian demand for oranges is [0.7 2p0.3p0.4 where Pa is the price of apples, po is the price of oranges, and I is Judy's income. Suppose I = 100, Pa = = 2, and po = 1. a) Find and interpret the income elasticity for the demand for oranges. Are oranges an 1 inferior or normal good? b) Find the own price elasticity of demand for oranges. Discuss how the price elasticity varies with po c) Find the cross price elasticity for oranges. Are oranges and apples gross substitutes or gross complements?
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter5: Elasticity
Section: Chapter Questions
Problem 31CTQ: Economists define normal goods as having a positive income elasticity. We can divide normal goods...
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Question
Judy's Marshallan demand for oranges is 2p03pan, where pa is the price of apples, po is the
price of oranges, and I is Judy's income. Suppose I = 100, Pa = 2, and Po = 1.
a) Find and interpret the income elasticity for the demand for oranges. Are oranges an
inferior or normal good?
b)Find the own price
C)Find the cross price elasticity for oranges. Are oranges and apples gross substitutes or gross complements?
Transcribed Image Text:Judy's Marshallian demand for oranges is
[0.7
2p0.3p0.4
where Pa is the price of apples, po is the
price of oranges, and I is Judy's income. Suppose I = 100, Pa
=
= 2, and po = 1.
a) Find and interpret the income elasticity for the demand for oranges. Are oranges an
1
inferior or normal good?
b) Find the own price elasticity of demand for oranges. Discuss how the price elasticity
varies with po
c) Find the cross price elasticity for oranges. Are oranges and apples gross substitutes or
gross complements?
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