1. If the cross-price elasticity of demand between printed textbooks and e-books

Question

1. If the cross-price elasticity of demand between printed textbooks and e-books is +0.20,

If textbook prices increase by 6 percent, by how much will e-book demand change?

Enter your response as a percent to one decimal place.

2.  Gasoline prices topped 3$ a gallon SUV sales will decrease if gasoline prices reach 3.50-4.00$ a gallon

If a gasoline price hike of 4 percent caused the SUV sales drop described, what is the cross-price elasticity of demand between gasoline and SUVs?

3. By how much will popcorn sales increase if average income goes up by 10 percent? (Assume the income elasticity of popcorn is 3.29.)

4. Compute the price elasticity between point  G to H.

G= 0.20$ per ounce with 16 ounces

H= 0.25$ per ounce with 20 ounces

5. By what percentage will cigarette sales decline in the short run, round to one decimal? Price elasticity= 0.4

Explanation / Answer

1)

0.2 = (dQe/Qe)/(dPt/Pt)

dQe/Qe = 0.2*dPt/Pt = 0.2*6 % = 1.2 %

2) Question not clear ????

3)

3.29 = (dQ/Q)/(dI/I)

dI/I = 10 % = 0.1

dQ/Q = 3.29 * dI/I = 3.29*10 % = 32.9 %

4)

dP = 0.25-0.2 = 0.05

dQ = 20 - 16 = 4

P = (0.25+0.2)/2 =0.225

Q = (16+20)/2 = 18

e = (dQ/Q)/(dP/P) = (4/18)/(0.05/0.225) = 1

5)

dQ/Q = elasticity * dP/P = 0.4*dP/P = 0.4 % per 1% increase in price

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