--%>
Assignment Help - homework help

Problem on cross-price elasticity

Kathy purchases two goods, t-shirts and caps.  Her demand for t-shirts is:

Qt = 44 – 3Pt - Pc + .04I

The price of caps is Pc = $2. And her income is I = $300.

a. Graph a demand curve for Kathy’s t-shirts.

b. Determine the number of t-shirts will Kathy buy if the price of t-shirts is Pt = $5?

c. Determine the number of caps will she buy at such prices and her present income? 

d. An increase in the price of caps will outcome in (circle one):

  • Kathy’s demand for t-shirts will shift out away from the origin
  • Kathy’s demand for t-shirts will shift in towards the origin
  • Kathy will move down along her demand curve for t-shirts
  • Can’t tell; it depends on whether or not caps are a normal good to Kathy

e.Determine the cross-price elasticity of the demand for t-shirts with respect to the price of caps?

f. Are caps and t-shirts complements or substitutes? And how do you know?

   Related Questions in Microeconomics

  • Q : Constant cost industry in competitive

    When brick-making is a constant cost industry, during the long run this firm is probable to experience: (i) a severe shrinking of economic profit to zero. (ii) a decline in the price of bricks to approximately eight cents apiece. (iii) increased compe

    		•
  • Q : Demand of purely competitive firm for

    This purely competitive firm’s demand as in given figure for labor corresponds to: (1) line segment ab. (2) line segment bd. (3) line segment be (4) line segment df. (5) line segment dg.

    Q : Question on elasticity of demand Select

    Select the right ans wer of the question. The demand for agricultural products is: A) relatively elastic with respect to price. B) relatively inelastic with respect to price. C) relatively elastic with respect to income. D) downward sloping to the individual farmer, b

    		•
  • Q : Aggregate effective demand Why,

    Why, according to Keynes, is investment the key economic variable? Why does he think that the volatility of investment spending is likely to cause a problem of aggregate effective demand? Why does he think that this problem can only be solved by government interventio

    		•
  • Q : Influence output price by market power

    Every firm which can considerably influence the price of its output: (i) is a pure monopoly. (ii) will be more profitable than any firm in pure competition. (iii) has market power: (iv) is essentially large relative to the market demand curve facing the firm. (v) has

    		•
  • Q : Relative Income Measurement by

    The Department of the Census explains low relative income as experienced while families: (w) lack sufficient income to buy the fundamental food clothing and shelter required for survival. (x) would like to improve the

    		•
  • Q : Minimum Wage Laws-unskilled workers I

    I have a problem in economics on Minimum Wage Laws-unskilled workers. Please help me in the following question. The Minimum wage legislation is unlikely to help: (i) Skilled workers who compete by unskilled workers. (ii) Unskilled workers who don&rsqu

    		•
  • Q : Break-even level of income The

    The break-even level of income for four member of family under the negative income tax system demonstrated in this figure is: (1) $15,000 per year. (2) $30,000 per year. (3) $45,000 per year. (4) $60,000 per year. (5) $75,000 per year

    		•
  • Q : Define Product Differentiation Product

    Product Differentiation: The Product differentitation is a condition when various producers under monopolistic competition, try to differentiate their product in terms of its size, shape, packaging, trade-mark and brand name. This is accomplish to att

    		•
  • Q : Interaction of demand and supply with

    Identify and explain the main economic factors that determine the price of a good or service. Please include how demand and supply interact and elasticity, etc. Also give examples with graphs.

    		•