QUESTION 1
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.
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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.
(12.5 marks)
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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.
(12.5 marks)
[25 marks]
QUESTION 2
Complete the table below, draw the market equilibrium curve (with scale) and indicate the equilibrium quantity as well as the equilibrium price.
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