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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.
- 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.
- 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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