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The price elasticity of demand of a product is -0.2 and the income elasticity of demand is 0.6. At a price of 7 50 per unit and a per capita income of 7 50,000, the demand for the product is 5,00,000 units per year. (i) Is the product in question an inferior good, a necessity, or a luxury? Explain. (ii) If the per capita income increases to 760,000, what will be the quantity demanded of the product? (iii) If the price of the product increases to ?60 and per capita income remains at 50,000, what will be the quantity demanded?

The price elasticity of demand of a product is -0.2 and the income elasticity of demand is 0.6. At a price of 7 50 per unit and a per capita income of 7 50,000, the demand for the product is 5,00,000 units per year. (i) Is the product in question an inferior good, a necessity, or a luxury? Explain. (ii) If the per capita income increases to 760,000, what will be the quantity demanded of the product? (iii) If the price of the product increases to ?60 and per capita income remains at 50,000, what will be the quantity demanded?

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter5: Elasticity
Section: Chapter Questions
Problem 1SCQ: From the data in Table 5.5 about demand for smart phones, calculate the price elasticity of demand...
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17. The price elasticity of demand of a product is -0.2 and the income elasticity of demand is 0.6. At a price of 750 per unit and a per capita income of 50,000, the demand for the product is 5,00,000 units per year. (i) Is the product in question an inferior good, a necessity, or a luxury? Explain. (ii) If the per capita income increases to ? 60,000, what will be the quantity demanded of the product? (iii) If the price of the product increases to 760 and per capita income remains at 50,000, what will be the quantity demanded?
Transcribed Image Text:17. The price elasticity of demand of a product is -0.2 and the income elasticity of demand is 0.6. At a price of 750 per unit and a per capita income of 50,000, the demand for the product is 5,00,000 units per year. (i) Is the product in question an inferior good, a necessity, or a luxury? Explain. (ii) If the per capita income increases to ? 60,000, what will be the quantity demanded of the product? (iii) If the price of the product increases to 760 and per capita income remains at 50,000, what will be the quantity demanded?
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