Question: Suppose the demand function for a firm's product is given by In Qdx =7 -1.5 In Px + 2 In Py -0.5 In M +

Suppose the demand function for a firm's product is given by

In Qdx =7 -1.5 In Px + 2 In Py -0.5 In M + In A

where

Px =$15

Py = $6

M= $40,000 and

A = $350

  1. Determine the own price elasticity of demand, and state whether demand is elastic, inelastic, or unitary elastic.
  2. Determine the cross-price elasticity of demand between good X and good Y, and state whether these two goods are substitutes or compliments.
  3. Determine income elasticity of demand, and state whether good X is a normal or inferior good.
  4. Determine the own advertising elasticity of demand.

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