Question
A Minnesota state legislator proposes to establish a matching grant program for children's recreational activities. The matching grant would pay 50 percent of each community's
A Minnesota state legislator proposes to establish a matching grant program for children's recreational activities. The matching grant would pay 50 percent of each community's expenditures on parks and recreation. This reduces the price of recreational activities to the community by 50 percent; for each hour of recreational activity provided, the community now pays only half the price and the state grant pays the other half. (7 points) a. What is the percentage increase in Minneapolis' quantity demanded of recreational services increase when the city receives the grant? [Use the price elasticity of demand from Problem 1 along with the percentage reduction in price to the community resulting from the grant.]
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