Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Julia has usual preferences over X and Y, and, at current prices and income, she spends 1/2 of her income on X. Her demands for

Julia has usual preferences over X and Y, and, at current prices and income, she spends 1/2 of her income on X. Her demands for both goods respond to changes in her income, but at current prices and income the income elasticity of her demand for Y is equal to exactly 1/3 times the value of her income elasticity of demand for X. And do you know what? If the price of Y were to go up by 1 percent, the quantity of X she demands would remain unchanged.

a. If the price of X were to fall, would her demand for X increase, decrease or remain unchanged? More precisely, what is the own-price elasticity of her demand for X?

b. If her income were to rise, would her demand for X rise, fall or remain unchanged? More precisely, what is the income elasticity of her demand

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Commercial Fishing On The Outer Banks

Authors: R Wayne Gray, Nancy Beach Gray

1st Edition

1439667055, 9781439667057

More Books

Students also viewed these Economics questions