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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. Price of T-Shirt

  • 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.
Price of T-Shirt Quantity Demanded I = $20G Quantity Demanded I=$30G
4 3000 5000
5 2400 4200
6 1600 3000
7 800 1800
  • a) Using the midpoint method, calculate the price  elasticity of demand when the price of a T-shirt rises from $5 to $6 when the  average tourist income is $20,000.  Also  calculate it when the average tourist income is $30,000. For each income  category, are t-shirt elastic or inelastic?
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  • b) Using the midpoint method, calculate the income elasticity of demand when the average tourist income increases from $20,000 to $30,000 when the price of a T-shirt is $4.  Also calculate it when the price is $7.
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  • c) Are t-shirts a normal or inferior good?

Apr 01 2020 View more View Less

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