All questions utilize the multivariate demand function for Brand X washing machines given in C2, page 81, initially with:

Initial values are: P_Y= $300 P_L= $0.30 I = $40000 A = $200000

The function is: Q_X= 197000 -100P_X+50P_Y+.025I +.02A + 10000P_L

1.(a). Use the above to calculate the arcprice elasticity of demand between P_X= $400 and P_X= $350. The arc elasticity formula is:

(b). Judging from the computation in 1(a), do you expect revenueresulting from the price decrease to $350 to increase, remain the same, or decrease relative to the revenue at the price of $400? (Hint: see the table on page 65 of Truett). Explain your choice.

2.(a). Calculate the point price elasticity of demand for brand X washing machines at P_X= $400 (which should make Q_X = 180000). The formula is:

(b). Does this elasticity value indicate that the demand for brand X washing machines is relatively responsive to changes in price (P_x) of the machines? Explain why or why not.

3.(a). Calculate the point self-service laundry cross-price price elasticity of demand at P_L= $0.30. Use Qx corresponding to P_X= $400 (which should make Q_X= 180000). Other variables and their values as given at the top, before question #1. The formula is:

E_XL=(Q_X)/(P_L )P_L/Q_X