Question: Smooth Sailing, Inc., has estimated the demand function for its sailboats (quantity purchased annually) as follows: Where, Q D = quantity purchased, P S =

Smooth Sailing, Inc., has estimated the demand function for its sailboats (quantity purchased annually) as follows:

Where,

QD = quantity purchased,

PS = the price of smooth sailing sailboats,

PX = the price of Company X's sailboat,

PY = the price of Company Y's motorboat,

I = per capita income in dollars,

A = dollars spent on advertising, and

W = number of favorable days of weather in the southern region of the United States.

a)Suppose that PS = $9,000, PX = $9,500, PY = $10,000, I = $15,000, A = $170,000, and W = 160. Find the price elasticity of demand at that point.

b)Is Elasticity of demand is elastic, inelastic, or unitary elastic in part (a)? Justify?

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