Question

1. The recent availability of satellite television has reduced the price of cable television subscriptions. Based on this statement, what may be concluded about price or cross-price, or income elasticity of demand? Be precise, indicate which elasticity coefficient you can comment on and explain your comment. 2. Currently, 100 tennis racquets (at $50 each) and 80 sets of golf clubs (at $200 a set) are sold in Sportsville each month. Using the average method, compute the cross price elasticity of demand for tennis racquets when a $100 increase in the price of golf clubs increases the sale of tennis racquets to 150 per month? Show your work. Are the two goods substitutes or complements? 3. The table below show income, prices and quantities purchased for good X and good Y. Income Price of X Price of Y Quantity of X Quantity of Y $30,000 $6 53 2 20 $50,000 $6 5 10 a. Calculate the income elasticity of demand for X using the midpoint formula and characterize the good. b. Can you calculate the income elasticity of demand for good Y? If you can, show your calculation and characterize the good. If you cannot, explain why