Suppose the own price elasticity of demand for good X is 2 i

Suppose the own price elasticity of demand for good X is -2, its income elasticity is 3, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4. Determine how much the consumption of this good will change if: Instructions: Enter your answers as percentages. Include a minus (-) sign for all negative answers.

a. The price of good X decreases by 6 percent.

b. The price of good Y increases by 8 percent.

c. Advertising decreases by 4 percent.

d. Income increases by 5 percent.

Solution

Products that are purchased for consumption by the average consumer. Alternatively called final goods, consumer goods are the end result of production and manufacturing and are what a consumer will see on the store shelf. Clothing, food, automobiles and jewelry are all examples of consumer goods. Basic materials such as copper are not considered consumer goods because they must be transformed into usable products.

The measurement of consumer goods sales is important in the assessment of gross domestic product and in determining the health of the overall economy. Demand for consumer goods indicates whether consumers are willing to part with cash. Items are only counted as consumer goods once - if they are resold, they will not be included in economic calculations.

a) The price of good X decreases by 6 percent when demand for good X is -2. consumption of this good will change will be in negative percentage.

b) The price of good Y increases by 8 percent when cross-price elasticity of demand between it and good Y is -4 is 2

c) Advertising decreases by 4 percent then the consumption of this good wii be 1 and the sign would be negative

d) Income increases by 5 percent.