Consider the market for pocket calculators that is initially in equilibrium at a price of $20.00 per calculator and 10,000 calculators are exchanged per week. Then the demand for pocket calculators increases because consumer incomes increase from $800 per week to $900 per week, so that at a price of $20.00 per calculator the demand for calculators rises to 12,000 calculators. This results in a new equilibrium in the market for pocket calculators at a price of $24.00 per calculator and 11,000 calculators exchanged per week.Answer the following questions. Present your working and reasoning where needed. Answers without working or reasoning will result in loss of marks.Q1. [4 marks] Draw a diagram representing what has happened in the market for pocket calculator.Q2. [4 marks] Using the mid-point method, calculate the income elasticity of demand between pocket calculators and consumer income. What does this tell you about the relationship between pocket calculators and consumer income?Q3. [4 marks] Using the mid-point method, calculate the price elasticity of supply for pocket calculators. Interpret the result.
