a) Qs=5000−1000×1+0.1×20000+1000×0.80=6080
(b) Point income elasticity =dIdQd×QdI
=0.1×20000/6080=0.33
(c) point cross elasticity = dPadQs×QsPa
=100×0.80/6080=0.01
(d) 6080=5000−1000×Ps+0.1×20000+100×0.6
1000Ps=980
Ps=0.98
required reduction = 1(1−0.98)×100=2%
Comments