QUESTION 2

P;q The following table below shows the hypothetical demands for Good X and Good Y for a given price of Good X, and consumer's income.

Price of Good X

(RM/unit)

Quantity demanded of Good X

(unit)

Quantity Demanded of Good Y

(unit)

Consumer's Income

(RM/month)

10

2

10

2000

8

4

8

1800

6

6

6

1600

4

8

4

1400

2

10

2

1000

a) Calculate the price elasticity of demand for Good X when its price increases from RM4 to RM8.

(2 marks)

b) Calculate the cross elasticity of Good Y when the price of Good X decreases from RM6 to RM2.

(2 marks)

c) What is the relationship between Good X and Good Y? Justify your answer.

(1 marks)

d) Calculate the income elasticity of Good X and Good Y when income increases from RM1400 to RM2000.

(4 marks)

e) What type of good are Good X and Y?

(1 marks)