Answer to Question #308578 in Microeconomics for Steve

Question

You have the following information for your products:

1.The price elasticity of demand is -0.9

2. The income elasticity of demand is 0.5

3. The cross - price elasticity of demand between your good and a related good is 2.0

What can you determine about consumer demand for your product from this information?

Answer 1

The good is a normal one as demand increases with increase in income, it is price elastic and has a close substitute