Microeconomics 20th Edition by Campbell McConnell, Stanley Brue,Sean Flynn

Exercise 7

Lorena likes to play golf. The number of times per year that she plays depends on both the price of playing a round of golf as well as Lorena's income and the cost of other types of entertainment-in particular, how much it costs to go see a movie instead of playing golf. The three demand schedules in the table below show how many rounds of golf per year Lorena will demand at each price under three different scenarios. In scenario D 1 , Lorena's income is $50,000 per year and movies cost $9 each. In scenario D 2 , Lorena's income is also $50,000 per year, but the price of seeing a movie rises to $11. And in scenario D 3 , Lorena's income goes up to $70,000 per year, while movies cost $11.

a. Using the data under D 1 and D 2 , calculate the cross elasticity of Lorena's demand for golf at all three prices. (To do this, apply the midpoints approach to the cross elasticity of demand.) Is the cross elasticity the same at all three prices Are movies and golf substitute goods, complementary goods, or independent goods
b. Using the data under D 2 and D 3 , calculate the income elasticity of Lorena's demand for golf at all three prices. (To do this, apply the midpoints approach to the income elasticity of demand.) Is the income elasticity the same at all three prices Is golf an inferior good