The market demand for a product is given by: Q= 300 - 5P + Y
The current level of income is 200. Where why is average consumer income?
1. Calculate the price elasticity of demand if the price of the good is $20.00?
2. Explain what happens to the price elasticity of demand if the income increases to 300 (all else remaining constant)?
3. Determine the income elasticity of demand if the price of the good $20 and income is $300? Is the good normal or inferior?
4. Assume the market was controlled by a monopolist who wanted to maximize its total revenue. What would be the price the monopolist should charge?