Intermediate Microeconomics Assignment Example | Topics and Well Written Essays - 250 words

Intermediate Microeconomics - Assignment Example EX, Y = % change in quantity demanded of a product X/ % change in price of product Y. = {(400+450)/ (5+4)}* (4-5)/ (450-400) = (850/9)*(-1/50) = 94.44/-0.02 = -4.722. The negative coefficient depicts an increase in price of computer will result to 4.72 percentages in decrease in demand for printers. Income elasticity of demand assesses the "sensitivity of the demand for a good to a change in the income of the consumers" (Mankiw 97). Ed = (A1+A2)/ (Q1+Q2)*(change in Q/change in A) = (10,000+15,000)/ (20+18)* (18-20)/ (15,000-10,000) = (25,000/38)*(-2/5,000) = (657.89*0.0004) = -0.263. As the consumers income increases the demand of the commodity decrease even though the price remains the same. This implies the goods are of inferior quality thus when income increases consumers opt for better quality products (Mankiw 109). Regressing the logs of independent variables Px, Py and I results to a linear function of the amount needed and the independent variables (Mankiw 123). The percent change in quantity demanded is determined by the coefficient of the income I, price of the product X and price of the product