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consumer income change

Suppose that during a given year: (1) the price of TV sets increases by 4 percent in Japan, (2) the dollar depreciates by 5 percent with respect to the yen (the Japanese currency), (3) consumer incomes in the United States increase by 3 percent, (4) the price elasticity of demand for imported TV sets in the United States is -1.5, and (5) consumers' income elasticity of demand for TV sets in the United States is 2. (a)* If the price of the imported TV set was $300 in the United States at the beginning of the year, approximately how much would you expect the price of the same imported TV set to be in the United States at the end of the year? (b)** By how much would the quantity demanded of imported TV sets in the United States change as a result of the change in price only? (c) By how much would the demand for imported TV sets in the United States change as a result of the increase in consumer income alone? (d) By how much would the demand for imported TV sets in the United States change as a result of both the change in price and in income?

Note: (a)* the 4 percent increase in the price of TV sets in Japan and the 5 percent depreciation of the dollar lead to a total increase of 9 percent in the dollar price of imported TV sets in the United States, from $300 to $327, and (b)** the change in price only?" refers to the import price.

Please show all work, formulas, and explain answer clearly.

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Suppose that during a given year:
(1) the price of TV sets increases by 4 percent in Japan,
(2) the dollar depreciates by 5 percent with respect to the yen (the Japanese currency),
(3) consumer incomes in the United States increase by 3 percent,
(4) the price elasticity of demand for imported TV sets in the United States is -1.5, and
(5) consumers' income elasticity of demand for TV sets in the United States is 2.

(a)* If the price of ...

Solution Summary

This post examines consumer income change.

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