When the price of good X is 100, the quantity demanded is 100. Calculate the relevant elasticities for the following changes:
When the price of X changes to 50, the quantity demanded rises to 250.
When the price of Y changes from 5 to 10, the quantity demanded of X increases to 120
When the person’s income changes from $10,000 to $20,000 the quantity demanded of X falls to 80
In your calculations use the midpoint rule since, effectively, you are calculating arc elasticities of demand. Also comment on whether the goods are substitutes/complements and normal/inferior for (ii) and (iii), respectively.
Please explain