The demand for widgets (X) is given by the following equation: Q X = A P X
Question:
The demand for widgets (X) is given by the following equation:
QX = A PX-0 .5 PW PY-1.25 PZ -0.25 I
where PX is the price of widgets,
PY, PW and PZ are the prices of woozles, gadgets, and whatsits respectively, and I is income.
(A) The manufacturer of widgets is contemplating an increase in its price. Is it possible to know whether revenue will increase or decrease given that the initial price of widgets is not known? (2)
(B) By how much must the price of widgets change if income decreases by 4% and the goal is to keep QX constant? (2)
(C) By how much PX must change if the price of whatsits (PZ) increases by 2% and the goal is to keep QX
constant? (2)
(D) How are widgets and woozles related in consumption? (2)
(E) How are goods woozles and whatsits related in consumption? (2)
Microeconomics
ISBN: 978-1464187025
2nd edition
Authors: Austan Goolsbee, Steven Levitt, Chad Syverson