Question: The demand functions for two commodities, A and B, are given by QA = AP 0.5 Y 0.5 and Q B = BP 1.5 Y

The demand functions for two commodities, A and B, are given by

QA = AP^−0.5Y^0.5 and Q_B = BP^−1.5Y^1.5
where A and B are positive constants

(a) Find the price elasticity of demand for each good and hence comment on the relative sensitivity of demand due to changes in price.
(b) Find the income elasticity of demand for each good. Which good is normal and which is superior? Give a reason for your answer.

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P P X QA Y b LA P P X A is inelastic and B is elastic so B is more sensitive ... View full answer

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