1. The SUBSTITUTION effect is caused by a change in INCOME. 2. Even If people re

Question

1. The SUBSTITUTION effect is caused by a change in INCOME.

2. Even If people really need something, they will NOT ALWAYS have a

LARGE demand for it. True or False?

Pick one: BallGame or Grocery Store?

1. Which spot, the demand for HOT DOGS likely to be MORE ELASTIC?

2. Which spot, the demand for HOT DOGS likely to be LESS ELASTIC ?

3. Which spot, the demand the seller likely to sell at a HIGHER PRICE?

Show first, the % change in quantity demanded and, second whether quantity demanded went up or down:

ELASTICITY: % CHANGE IN PRICE:

1. - 4 went up 3%

2. - 2 went down 3%

3. -30 went down 1 %

4. - .792 went up 1 %

Explanation / Answer

False

True

Grocery Store

Ball Game

Ball Game

elasticity = % change in quantity/ % change in price

% change in quantity = -4*3% = -12%

quantity demanded went down

% change in quantity = -2*-3% = 6%

quantity demanded went up

% change in quantity = -30*-1% = 30%

quantity demanded went up

% change in quantity = -.792*1% = -.792%

quantity demanded went down

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