Question: Suppose a demand function is given by q = 2 0 3 p + 2 m , where p and m and price and income,

Suppose a demand function is given by q =203p +2m , where p and m and price and income, respectively. Calculate the price and income elasticity when p =2 and m=1. Holding income constant, what price should be charged if we would like to increase quantity demanded by 12.5%? Remember, the definition of an elasticity is the ratio of percentage changes.

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