Consumer buys 10 units of Good A when the price of Good B is $5. When the price of Good B rises to $6 (the price of Good A remaining unchanged) the consumer buys 14 units of Good A. Part A: Using an appropriate formula, calculate this Consumer’s cross Elasticity of demand for Good A. Show your working. Part B: Is Good A, a substitute for, or a complement to, Good B? Explain your reasoning.

/in /by

Consumer buys 10 units of Good A when the price of Good B is $5. When
the price of Good B rises to $6 (the price of Good A remaining
unchanged) the consumer buys 14 units of Good A.

Part A:

Using an appropriate formula, calculate this Consumer’s cross
Elasticity of demand for Good A. Show your working.

Part B:

Is Good A, a substitute for, or a complement to, Good B? Explain your
reasoning.

You might also like
What if farmer 1 is a leader and farmer 2 a follower, determine the price, quantity and profits made by these two farmers.
How do you know whether your estimated model is a good one or not? Explain.
Suppose a consumer consuming two commodities X and Y has the following utility function X0.4 Y0.6. If price of good X and Y are 2 and 3 respectively and income constraints birr 50. A/ Find the quantities of X and Y which Maximize utility B/ Find the MRSxy
v> COMBINATION TABLET (UNITS) COFFEE (UNITS) A 0 10,000 B 100 9,000 C 200 7,500 D 300 5,500 E 400 0 B) Explain how the opportunity cost changes when the production of tablets is increased progressively from 0 units to 400 units. Give a reason for the changes in opportunity cost observed. (4 marks) C) If a national lockdown reduces the supply of workers in both the tablet and coffee markets, use a diagram to show how the production possibility curve of the economy changes. Explain your answer briefly. (4 marks) D) If an improvement in technology is seen in the production of coffee, use a diagram to show how the production possibility curve of the economy changes. Explain your answer briefly (4 marks)
What are Giffen goods? Distinguish the substitution effect and Income effect in case of a Giffen goods; with the help of a diagram.
WHAT IS THE DIFFERENCE BETWEEN WANT AND DEMAND? EXPLAIN IT WITH THE HELP OF EXAMPLE
A monopolist has demand and cost curves given by: _ _ QD = 10,000 - 20P TC = 1,000 + 10Q + .05Q2 i. Find the monopolist's profit-maximizing quantity and price. ii. Find the monopolist's profit.
Saron spends 150 birr per month on coffee and cake at the cafeteria. A cup of coffee costs 15 birr and a cake costs 10 birr. a) Write the equation for Saron’s cafeteria budget constraint and draw it in a diagram. b) Assume that Saron never drinks coffee without eating one cake, and never eats cakes without drinking coffee. How much of each will she consume? Draw some of her indifference curves. c) What do we call goods that are always consumed in the same proportion?