Question #2002694: Elasticity Theory

Question: Suppose that, at the current price of $1.50 per gallon and average household income of $100,000 a yr, the quantity demanded of bottled water is 200 million gallons a week. If the price were increased to $1.68, the quantity demanded would fall to 158.7 million gallons a week. If the household income were increased to $110, 500 a yr, the quantity demanded would rise to 208 million gallons a week.

(A) Calculate the own price elasticity of demand.

(B) Calculate the income elasticity of demand

(C) According to these estimates, is bottled water a normal or inferior product?

Solution: The solution consists of 151 words (1 page)
Deliverables: Word Document

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