Chapter Checkpoint

Study Plan Problems and Applications

When the price of home heating oil increased by 20 percent, the quantity ­demanded decreased by 2 percent and the quantity of wool sweaters demanded increased by 10 percent. Use this information to work Problems 1 and 2.

  1. Use the total revenue test to determine whether the demand for home heating oil is elastic or inelastic.

  2. If the price of a wool sweater did not change, calculate the cross elasticity of demand for wool sweaters with respect to the price of home heating oil. Are home heating oil ...

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