Suppose the demand function for good A is given as , where QA is quantity demanded of the good A PA is price of the good A Pr is price of related good and M is income of the consumer Assume further that PA 10 Pr 15 and M 100, then A Compute the price elasticity of demand for good A with respect to the price of good A at the current situation Interpret the nature of the price elasticity of demand 1 B What is the cross price elasticity of the demand for good A with respect to the price of related good at the current situation What is the relationship between the two goods C What is the income elasticity of demand for good A at the current situation and the nature of the good D If income of the consumer changes by 20 by how much do you think demand for good A would change

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Question: Suppose the demand function for good A is given as:, where QA is quantity demanded of the good A; PA is price of the good

Suppose the demand function for good A is given as:, where QA is quantity demanded of the good A; PA is price of the good A; Pr is price of related good and M is income of the consumer. Assume further that PA = 10; Pr = 15 and M=100, then:

A. Compute the price elasticity of demand for good A with respect to the price of good A at the current situation? Interpret the nature of the price elasticity of demand.

B. What is the cross-price elasticity of the demand for good A with respect to the price of related good at the current situation? What is the relationship between the two goods?

C. What is the income elasticity of demand for good A at the current situation and the nature of the good?

D. If income of the consumer changes by 20% by how much do you think demand for good A would change?

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