Answer to Question #161107 in Economics for Drestar

Question

34. If the price elasticity of demand is 3, a 10 percent increase in the price of the good results in a 

[1] 3 percent increase in the quantity demanded. 

[2] 30 percent increase in the quantity demanded. 

[3] 300 percent increase in the quantity demanded. 

[4] 30 percent decrease in the quantity demanded. 

35. If the income elasticity of demand for a good is 3, a 10 percent increase in income results in a 

[1] 3 percent increase in the quantity demanded. 

[2] 30 percent increase in the quantity demanded. 

[3] 300 percent increase in the quantity demanded. 

[4] 30 percent decrease in the quantity deman

Answer 1

34.

$$E_d=\dfrac{\%Q}{\%P},$$ $$\%Q=E_d\%P=3\cdot10\%=30\%.$$

Therefore, a 10 percent increase in the price of the good results in a 30 percent increase in the quantity demanded. Answer [2].

35.

$$E_d=\dfrac{\%Q}{\%Y},$$ $$\%Q=E_d\%Y=3\cdot10\%=30\%.$$

Therefore, a 10 percent increase in income results in a 30 percent increase in the quantity demanded. Answer [2].