Question
The owner of Christie' Bookstore is looking into the sales of its Health & Fitness magazine section. She finds that her equilibrium is at 1000
The owner of Christie' Bookstore is looking into the sales of its Health & Fitness magazine section. She finds that her equilibrium is at 1000 magazines per month sold at an average price of $4.25 per magazine. When the average price of these Health & Fitness magazines rose to $4.95 each, the quantity demanded fell to 900 magazines per month, while the quantity supplied to her increased to 1250 a month.
a.Draw an appropriate graph for Christie's original Health & Fitness magazine market position.
b.Calculate the price elasticity of demand for the Health & Fitness magazines between prices $4.25 and $4.95. Is it elastic or inelastic? How do you know?
c.Calculate the price elasticity of supply for the Health & Fitness magazines between prices $4.25 and $4.95. Is it elastic or inelastic? How do you know based on your answer?
d.Describe three realistic factors could affect the elasticity of demand for Health & Fitness magazines.
e.Christie also notices that when the average price of the Health & Fitness magazines rose from $4.25 to $4.95, the quantity of nutritious snack bars sold at the checkout register fell by 12%. Calculate the cross elasticity of demand between the two goods. Based on your answer, are they substitutes or complements?
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