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The following table shows the price and yearly quantity sold of souvenir T-shirts in the town of Solvang Vintage according to the average income of

The following table shows the price and yearly quantity sold of souvenir T-shirts in the town of Solvang Vintage according to the average income of the tourists visiting.

  1. a)Using the POINT ELASTICITY method, calculate the price elasticity of demand when the price of a T-shirt rises from $5 to $6 and the average tourist income is $20,000. Also calculate it when the average tourist income is $30,000. Based on your calculations, judge whether this T-shirt shows elastic demand or inelastic demand.
  2. Using the ARC ELASTICITY method, calculate the income elasticity of demand when the price of a T-shirt is $4 and the average tourist income increases from $20,000 to $30,000. Also calculate it when the price is $7. Based on your calculations, judge whether this T-shirt is normal good or inferior good.

P Quantity demand when $20000 Quantity demand when $30000

$4 3200 5100

$5 2600 4200

$6 1800 3200

$7 900 1800

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