Question: (a) A firm's demand function for good x is estimated as follows:- Qx = 1800 - 1/4Px + 1/8Py - 1/3Pz + 1/5Y Where Qx

(a) A firm's demand function for good x is estimated as follows:-

Qx = 1800 - 1/4Px + 1/8Py - 1/3Pz + 1/5Y

Where Qx represents quantity demanded of good x, Px is price of good x, Py is

price of good y, Pz is price of good z and Y is income.

(i) State whether goods Y and Z are substitutes or complements for good X.

Justify your answer. [5 marks]

(ii) Explain whether the law of demand is satisfied in this equation.[5 marks]

(b) Using appropriate diagram(s), discuss how an increase in the price of coffee would

affect the demand of tea.[5 marks]

(c) Using examples to illustrate your answer, explain the concepts of price elasticity of

demand and income elasticity of demand.[5 marks]

(d) Explain how a Business makes use at the concept of PEd (Price Elasticity of

Demand), Yed (Income Elasticity of Demand) and Xed (Cross Elasticity of Demand) (10 M)

(e)A theatre decreases the price of its tickets from $10 to $8. As a result, its quantity

demand for tickets increases from 400 to 450 units.

Calculate the price elasticity of demand for theatre tickets.(5 marks)

(f)Assume the demand for cricket match tickets at Rs50 is 50,000 per week in India.

If the Cricket club raises its prices to Rs60 per ticket and subsequently the demand

falls to 45,000 per week. Calculate the value of Price elasticity of demand.(5 marks)

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