Pottery Barn’s in – house team of economists has estimated the following U.S. market demand function for Pottery Barn’s iconic apothecary table (which is given below). Let good X be the apothecary table produced by Pottery Barn. Thus, Q_x^d is the quantity demanded of Pottery Barn apothecary tables, which is measured in tables.

Q_x^d=3000-2.52P_x-1.9P_y+0.06M+0.004A-P_x^exp

Notation for variables is provided in the table below along with the values of each variable. All variables in the table below are measured in US dollars. Notation Variable Value P_x Price of good X $1,100 P_y Price of good Y $600 M Average household income in the U. S. $42,000 A Advertising expenditures by pottery Barn $500,000 P_x^exp Consumer’s expectation of future price of good X $800

1)Using the above data, find the sales of Pottery Barn’s iconic apothecary table.

2)What is the price elasticity of demand for apothecary table? Is the demand for apothecary table price elastic, or inelastic?

3)How do you know? Should the Pottery Barn management increase, or lower if it desires to increase the operating revenue? Why or why not?

4)What is the income elasticity of demand for Pottery Barn’s iconic apothecary table? Is the apothecary table a normal, or inferior good? How do you know?

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answer To find the sales of Pottery Barns iconic apothecary table we can use the demand function pro... View the full answer