Question: Lorena likes to play golf. The number of times per year that she plays depends on both the price of playing a round of golf as well as Lorena's income and the cost of other types of entertainment -in particular, how much it costs to go see a movie instead of playing golf. The two demand schedules in the table below show how many rounds of golf per year Lorena will demand at each price under two different scenarios. In scenario D1, Lorena's income is $50,000 per year and the movies cost $9 each. In scenario D2, Lorena's income is $70,000 and the price of movies rises to $11 each.
Quantity demanded
PRICE ($)
D1 D2
50 15
10 35
25 15
a) Using the data under D1 and D2, calculate the cross elasticity of Lorena's demand for golf at all two prices. Are movies and golf substitutes, complements or independent goods?
b) Using the data under D1 and D2, calculate the income elasticity of Lorena's demand for golf at all two prices. Is golf an inferior good?