Question
In relation to the sample answer for the following question 1. Mr. Smith has a daily demand for the famous homemade sausage in beer garden
In relation to the sample answer for the following question 1. Mr. Smith has a daily demand for the famous homemade sausage in beer garden Goedkoop: Qs = 30 - Ps + 4P8 -0.11 In which Ps is the price for the sausage, PR is the price for Goedkoop's home brewed beer, and I is Smith's daily income. (Suppose that beer and sausages are infinitely divisible: They can be consumed at half unit, 1/3 unit, or 1.23 units etc.) a. Is sausage a normal good or an inferior good for Mr. Smith with respect to his daily income? b. Suppose that Ps = 4, Pg = 5,1 = 60. Compute sausage's own price elasticity and the sausage-beer cross price elasticity at the level of sausage demanded by Mr. Smith. Are beer and sausage complements or substitutes for Mr. Smith?
Need further clarification:
From the demand equation, we know that, dQs/dI = -0.1
Question 1: How to get the dQs/dl = -0.1
Own elasticity of demand = (dQs/dPs)(Ps/Qs) = (-1)(4/40) = -0.1
Question 2: -1 is from where?
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