1.The table below gives data for a particular market.

Year

Average Income

Price of A

Quantity of A

Price of B

Quantity of B

1

$40,000

$2

800

$10

16

2

$40,000

$3

600

$10

18

3

$40,000

$3

400

$8

20

4

$48,000

$3

600

$8

22

Answer the following questions in the space provided, showing all calculations for a - e to receive full marks.

a)What is the price elasticity of demand for product A?

b)What is the price elasticity of demand for product B?

c)What is the income elasticity of demand for product A?

d)What is the income elasticity of demand for product B?

e)What is the cross-elasticity of demand of product A for a change in the price of product B?

f)Is the demand for product A elastic or inelastic?

g)If the price of product B is decreased, what would happen to total revenue?

h)If the price of product A is increased, what would happen to total revenue?

i)Is product A a luxury good, a necessity, or an inferior good?

j)Is product B a luxury good, a necessity, or an inferior good?

k)Are products A and B substitutes or complements?