For these questions, please refer to the following table: https://drive.google.c

Question

For these questions, please refer to the following table: https://drive.google.com/file/d/0B-gQ84rVpHz_TWVtcWUxUzhTb1k/view?usp=sharing

1.) Assume that factors that may change demand but are not listed in the table below do not change between the three months. What is the price elasticity of demand for cookies?

1/4

1/3

1/2

1

Not enough information

2.) Assume that factors that may change demand but are not listed in the table below do not change between the three months. What is the price elasticity of demand for cat food?

1/2

1

2

4

Not enough information

3.) Assume that factors that may change demand but are not listed in the table below do not change between the three months. True or False: Both cookies and cat food are normal goods.

True

False

Explanation / Answer

For question 1 and question 2, information is not enough to calculate the price elasticity of demand. This is because we have to fix other variables that impact demand of the good like income of the consumer, price of the related goods, tastes and preferences of the consumer etc. In this table the income of the consumer is not fixed and thus price elasticity of demand cannot be calculated.

Answer 3:

False. The goods are inferior goods because increase in income between January and march is leading to fall in the consumption level of cookies and cat food. Thus the goods are inferior goods.

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