Question 5: Elasticity (Chapter 4)

1. If a 10 percent fall in the price of beef increases the quantity of beef demanded by 20 percent and decreases the quantity of chicken demanded by 15 percent, calculate the cross elasticity of demand between beef and chicken. Please be sure to indicate the sign of the cross elasticity (i.e., positive or negative).
2. Judy's income has increased from $10000 to $12000. Judy increased her demand for concert tickets by 10 percent and decreased her demand for bus rides by 5 percent. Calculate Judy's income elasticity of demand of demand for (a) concert tickets and (b) bus rides. On the basis of this information indicate whether concert tickets and bus rides are normal goods or inferior goods.