# Question

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.

## Answer to relevant Questions

Suppose the own price elasticity of demand for good X is – 2, its income elasticity is 3, its advertising elasticity is 4, and the cross-price elasticity of demand between it and good Y is –6. Determine how much the ...The demand function for good X is Qdx = a + bPx + cM + e, where Px is the price of good X and M is income. Least squares regression reveals that a = 5.25, b = – 1.36 c = –0.14, σa = – 6.19. σa = – 0.56, and σc = ...You are a manager in charge of monitoring cash flow at a company that makes photography equipment. Traditional photography equipment comprises 80 percent of your revenues, which grow about 2 percent annually. You recently ...A consumer has $400 to spend on goods X and Y. The market prices of these two goods are Px = $10 and Py = $40.a. What is the market rate of substitution between goods X and Y?b. Illustrate the consumer’s opportunity set in ...It is common for supermarkets to carry both generic (store-label) and brand-name (producer-label) varieties of sugar and other products. Many consumers view these products as perfect substitutes, meaning that consumers are ...Post your question

0