Using the demand curve plotted in exercise 1, illustrate what would occur if the income elasticity of demand was 0.05 and income rose by 10 percent. If the income elasticity of demand was 3.0 and income rose by 10 percent, what would occur?

Use the following hypothetical demand schedule for movies

Data from in exercise 1

a. Determine the price elasticity of demand at each quantity demanded using the arc or midpoint formula: Percentage change in quantity demanded = (Q₂ - Q₁)/Q₁ divided by percentage change in price = (P₂ - P₁)/P₁.

b. Redo exercise 1a using price changes of \($10\) rather than \($5\).

Transcribed Image Text:

Quantity Demanded 100 Price Elasticity $ 5 80 $10 60 $15 40 $20 20 $25 10 $30