# Question

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

ln Qdx = 7 1.5 ln Px + 2 ln Py - 0.5 ln M + ln A

Where

Px = $ 15,

Py = $ 6,

M = $ 40,000, and

A = $ 350.

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.

ln Qdx = 7 1.5 ln Px + 2 ln Py - 0.5 ln M + ln A

Where

Px = $ 15,

Py = $ 6,

M = $ 40,000, and

A = $ 350.

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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