The accompanying table shows the price and yearly quantity sold of souvenir T-shirts in the town of Crystal Lake according to the average income of the tourists visiting.
Price of T-shirt
Quantity of T-shirts demanded when average tourist income is $20,000
Quantity of T-shirts demanded when average tourist income is $30,000
$4
3,000
5,000
5
2,400
4,200
6
1,600
3,000
7
800
1,800
a. Using the midpoint 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.
b. Using the midpoint 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.