Answer:
demand curve for Good X is more elastic than the demand curve for Good Y
Demand for good X is elastic because the coefficient of elasticity is greater than 1.
Demand for good Y is inelastic because the coefficient of elasticity is less than 1.
consumers who buy Good Y are less sensitive to price changes than consumers who buy Good X
Explanation:
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one
Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.
For good X,
Percentage change in price = $55 / $60 - 1 = | -0.0833| = 8.33%
Percentage change in quantity demanded = 500 / 400 - 1 = 0.25 = 25%
Elasticity of demand = 25% / 8.33% = 3
Demand for good X is elastic because the coefficient of elasticity is greater than 1.
For good Y,
Percentage change in price = $55 / $60 - 1 = | -0.0833| = 8.33%
Percentage change in quantity demanded = 500 / 475 - 1 = 0.0526 = 5.26%
Elasticity of demand = 5.26% / 8.33% = 0.63
Demand for good Y is inelastic because the coefficient of elasticity is less than 1.
consumers who buy Good Y are less sensitive to price changes than consumers who buy Good X
