# Question: Suppose the demand function for a firm s product is given

Suppose the demand function for a firm’s product is given by

In Qdx = 3 – 0.5 In Px – 2.5 In Py + In M + 2 In A

where

Px = $10,

Py = $4,

M = $20,000, and

A = $250.

a. Determine the own price elasticity of demand, and state whether demand is elastic, inelastic, or unitary elastic.

b. Determine the cross-price elasticity of demand between good X and good Y, and state whether these two goods are substitutes or complements.

c. Determine the income elasticity of demand, and state whether good X is a normal or inferior good.

d. Determine the own advertising elasticity of demand.

In Qdx = 3 – 0.5 In Px – 2.5 In Py + In M + 2 In A

where

Px = $10,

Py = $4,

M = $20,000, and

A = $250.

a. Determine the own price elasticity of demand, and state whether demand is elastic, inelastic, or unitary elastic.

b. Determine the cross-price elasticity of demand between good X and good Y, and state whether these two goods are substitutes or complements.

c. Determine the income elasticity of demand, and state whether good X is a normal or inferior good.

d. Determine the own advertising elasticity of demand.

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